Source: Zhitong Finance and Economics
Author: Yujing
Gold is already the focus of market attention because investors tend to flock to the precious metal amid geopolitical instability, rising inflation, recession fears and other uncertainties. Investors have been watching gold stocks closely since rising inflation and the stock market turmoil triggered by the Fed's subsequent sharp rise in interest rates.
Juerg Kiener, managing director and chief investment officer of Swiss Asia Capital, said in an interview in December that the price of gold could reach between $2500 and $4000 sometime in 2023. The analyst said at the time that he expected a mild recession in the first quarter of 2023, which would cause many central banks to slow the pace of interest rate increases and make gold more attractive.
The analyst also said that if inflation persists, gold will become more attractive around the world because he believes that gold is "a good hedge against inflation, a big gain during stagflation and a big complement to the portfolio."
The rise in gold prices seen by the market at the start of the year collapsed after a strong jobs report and no signs of falling inflation in the US, as investors expected the Fed to continue to raise interest rates. When interest rates rise, investors cling to yields because there is no return on gold. The stronger dollar also makes it difficult for foreign investors to buy gold. At the end of 2022, analysts predicted that gold would recover strongly in 2023 because they expected inflation to fall and the Fed would suspend interest rate hikes, but those expectations were dashed.
Since the banking industry began to waver, the price of gold is now rising. Some analysts hope the Fed will slow the pace of rate hikes to avoid more problems in the banking sector. On march 17th, spot gold rose about 3.1 per cent to $1977.89 an ounce, the highest level since April 2022. Us gold futures also rose 2.6 per cent to close at $1973.50 an ounce as of March 17.
Another latest factor driving gold prices is that the ECB continues to raise interest rates despite the latest crisis in the banking sector. The ECB's decision led to the appreciation of the euro and the depreciation of the dollar, which eventually boosted the price of gold. Analysts believe the latest rift in the banking system has led investors to turn again to gold, the ultimate safe haven.
The latest market situation does provide an opportunity for long-term investors to pour into currently undervalued gold stocks.
Based on the holdings of 943 hedge funds at the end of the fourth quarter of 2022, the 11 gold stocks with a price-to-earnings ratio of less than 20 as of Feb. 24 were welcomed by the most hedge fund investors:
$Sandstorm Gold (SAND.US)$、$AngloGold Ashanti (AU.US)$、$Gold Fields (GFI.US)$、$Sibanye Stillwater (SBSW.US)$、$Yamana Gold (AUY.US)$、$I-80 Gold (IAUX.US)$、$DRDGOLD (DRD.US)$、$Equinox Gold (EQX.US)$、$New Gold Inc (NGD.CA)$、$B2Gold (BTG.US)$And$SSR Mining (SSRM.US)$.
Edit / Jeffrey