5 Gold Mining Stocks Set To Keep Winning Streak Alive In 2020

2019 has been quite an eventful year for gold with the major highlight being the yellow metal crossing the threshold limit of $1,500 an ounce— at levels last seen in 2013. Uncertainty in the U.S-China trade front, geopolitical concerns between the United States and the Middle East, the Brexit mayhem and concerns over the global economic outlook have compelled investors to seek safe-haven investment options like gold.

Further, three rate cuts by the Fed this year has been favoring the rally. Notably, lower the interest rates, lesser will be the opportunity cost of holding non-yielding bullion, making gold an attractive option for investors holding other currencies. A sluggish manufacturing sector also drove the gold prices.

So far this year, gold prices globally have gained about 15%, a striking contrast to the prior year decline of 2%. Gold seems set for its strongest annual increase since 2010, wherein it had reported growth of 29.5%.

Newmont Mining Corporation’s acquisition of rival Goldcorp for $10 billion to form Newmont Goldcorp Corporation (NEM - Free Report) hogged the headlines in the industry this year. This follows the $5.4 billion merger between Barrick Gold Corporation and Randgold Resources Limited last year. The trend of consolidation in the industry seems to have revived after a lull over the past few years when the companies were forced to cut debt levels and slash capital expenditure thanks to lower gold prices. Given that gold production is anticipated to drop eventually owing to scarcity of new discoveries and depleting existing resources, miners prefer to build up reserves through acquisitions rather than digging for new ones that are inherently risky and capital intensive.

Major markets India and China (that roughly account for around 50% of consumer gold demand) continue to sustain demand for gold. The expanding middle class in China and India, and broader economic growth, will have a significant impact on gold demand. Use of gold across energy, healthcare, and technology is on the rise. Moreover, the yellow metal has long been considered as a safe-haven investment in times of financial or political uncertainty. Emerging market central banks are turning their attention to gold after years of exposure to the U.S. dollar, and as a natural currency hedge against other reserve currencies. So, there will be an eventual demand-supply imbalance that is likely to drive gold prices, which bodes well for the industry.

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