The last time I picked on a gold miner was January 5 when my target wasRandgold (GOLD – Free Report) . Today it’s Barrick Gold (ABX – Free Report) whose 2017 EPS estimates have fallen 10% in the past 60 days from $1.02 to $0.91, pushing the stock into the cellar of the Zacks Rank.
And only two weeks ago the Zacks Industry Rank for the gold miners was in the bottom 24% at #201 out of 265. Today, that industry rank has dropped to the bottom 11% at #239, with other names like Newmont Mining (NEM – Free Report) , Goldcorp(GG – Free Report) , and Anglogold Ashanti (AU – Free Report) joining the chorus of Zacks #5 Rank Strong Sells.
As I wrote in early January…
It’s no surprise that gold miner earnings and shares should have taken a breather from their terrific rally in the first half of 2016 as the price of the yellow metal, as measured by the SPDR Gold Shares ETF (GLD), started topping this summer and dropping this autumn.
What may be a surprise for gold investors is if the drop continues as interest rates rise and the dollar pushes higher.
But longer term, gold may not have fully lost its luster. If gold prices stabilize around $1200, as many investment bank forecasts project, then demand for the barbarous relic could remain steady as a store of diversification, if not value, and a hedge against any given currency.
Several miners will eventually be in demand themselves in this case as their costs of production are much lower than $1200. For some, gross margins are in the high double digits.
The Rank Is Short-Term
If gold cannot recover the $1200 level, this will continue to be reflected in the Zacks Rank for the miners as their EPS estimates should continue to fall.
So if you are in the market for gold’s diggers, watch their costs and their earnings trajectory. The Zacks Rank will keep you informed on the latter.
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