There’s a Golden Shelter From Recession Risks With These Miners
There’s a better potential haven than gold for investors spooked by the risk of a recession this year -- mid-sized producers who’ve outperformed both bullion and the rest of the mining industry.
Companies including Canada’s Kirkland Lake Gold Ltd. and Australia’s Northern Star Resources Ltd. have scope to extend gains and should be in focus for investors looking for a safe harbor, according to Joe Foster, New York-based portfolio manager for the $600 million Van Eck International Investors Gold Fund.
Kirkland Lake, Northern Star and two rivals have the best returns in the Bloomberg World Mining Index over the past 12 months -- a period during which both the gold price and the equity benchmark have declined.
“Gold responds to global financial risk and so, if you believe that, the best way to play gold is with these gold stocks,” Van Eck’s Foster said in an interview. “They carry leverage to gold and in a good gold market, they will outperform.”
Spot bullion began rallying in the last quarter and is forecast to end this year higher, according to analysts’ estimates compiled by Bloomberg. The metal will climb to $1,425 an ounce, a price level not seen in more than five years, as geopolitical tensions fuel central bank purchases and recession fears boost demand for defensive assets, Goldman Sachs Group Inc. said this month.
Gold’s traditional status as a haven asset has been called into question in some recent periods of volatility. Bullion remained largely unmoved for much of 2018 as U.S.-China trade tensions unfolded, with investors fleeing instead to the dollar.
Producers too have also disappointed in the past. A Bloomberg Intelligence index of senior gold equities lost more than three-quarters of its value from late 2011 through the end of 2015 as companies reeled from failed deal-making and a tumbling price of the metal.
Still, gold equities are “an attractive option for a diversified portfolio, especially if we are moving into a period of higher market volatility,” said Stephen Land, portfolio manager for the Franklin Gold & Precious Metals Fund, which manages about $1 billion and holds producers including B2Gold Corp., Newcrest Mining Ltd. and OceanaGold Corp.
Northern Star fell 0.7 percent in Tuesday trading in Sydney to trim its advance in the past 12 months to 53 percent, as Evolution rose 0.5 percent. Kirkland climbed 1 percent Monday in Canada.
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