Gold Mining Stock Outlook - Sept. 2017

ETF Inflows Slowed Down

Compared with the last year’s record pace, ETF inflows have slowed. In the first half of 2017, inflows reached 167.9 tons. Europe mainly drove the ETF market in 2017, accounting for 76% of inflows in the first half.

The three main factors that influenced investor attitudes toward gold ETFs were — monetary policy normalization, gold price and event risk. The prospect of continued monetary tightening dampened ETF demand. Rising interest rates are usually considered as negative for gold.

Higher gold prices led to some investors taking a more cautious approach. Event risk, particularly surrounding geopolitical tension, remained a key driver of demand for ETFs. Frequent global terrorist incidents, tension between the United States and North Korea added to the inflows.

Supply Growth in the Red: A Signal of Caution?

Mine Production was flat at 1,557 tons in the first half. In the second quarter, mine production was pegged at 791.2 tons, the lowest second quarter since 2014. Production in China dipped 8% due to more stringent environmental regulations. In Tanzania, an ongoing dispute between the government and Acacia Mining led to 20% plunge in production. Production in Mongolia declined 30% year over year, as Oyu Tolgoi continues through a planned phase of low grading.

In Indonesia, the resumption of concentrate exports from Freeport-McMoRan Inc. (FCX - Free Report) operated Grasberg mine led to 30% rise in gold production. In Suriname, the continued ramp up of Newmont Mining Corp.'s (NEM - Free Report) Merian gold mine helped output surge by 80% year over year. In Canada, second-quarter output rose by 8% year over year, partly due to the start-up of the Hope Bay and Brucejack mines.

Sector Level Earnings Trend

Per the Zacks classification, the gold-mining industry comes under the broader Basic Materials sector. The sector’s earnings rose 7% in the second quarter, a deceleration from growth of 13.5% witnessed in first-quarter 2017. Even though the sector’s earnings will decline 11.2% in the third quarter, growth will resume with a projected 9.1% rise in earnings for the fourth quarter. (For a detailed look at the earnings outlook for this sector and others, please read our Earnings Trends report.)

View single page >> |

You can see the complete list of today’s Zacks #1 Rank stocks here.

Disclosure: ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.