Gold Mining Stock Outlook - Sept. 2017

Industry Ranking – Negative

The Zacks Industry Rank relies on the same estimate revisions methodology that drives the Zacks Rank for stocks. The way to look at the complete list of industries is that, we put our X industries (all 265 of them) into two groups: the top half (i.e., industries with the best average Zacks Rank) and the bottom half (the industries with the worst average Zacks Rank).

In the last 10 years, using a one-week rebalance, the top half beat the bottom half by a factor of more than 2 to 1. Click here to know more: About Zacks Industry Rank

Within the Zacks Industry classification, the gold mining industry is grouped under the Basic Materials sector (one of 16 Zacks sectors). The gold mining industry occupies a space in the bottom half of the Zacks classified industries with a Rank of #172.

Improved Price Performance, Attractive Valuation

Year to date, the Zacks Gold Mining industry has gained 13.0%, outperforming the S&P 500’s advance of 11.9%.

Going by the EV/EBITDA multiple (a preferred valuation metric for mining companies that have high capital expenditures), the gold mining industry has a trailing 12-month EV/EBITDA multipleof 7.55, lower than the S&P 500 EV/EBITDA multiple of 11.09.

Where Is the Industry Headed?

In the United States, even though there are positive expectations about President Trump’s economic proposals, there are also concerns. Further, the United States-North Korea imbroglio has turned the tables this year for gold. Mounting fears regarding what’s next — negotiation or war — works in favor of gold which is considered a good store of value during political turmoil.

Macroeconomic trends in Asia will support economic growth in the coming years. Given that gold demand is generally closely correlated to increasing wealth in the continent, gold demand will increase in tandem. In Asia, gold demand is mainly retail demand for the metal, due to festival and wedding related buying activities in countries like India and China.

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

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