Gold consolidates in a tight range and has a solid potential for a strong upside move.
Gold mining stocks have already developed strong upside momentum.
Traders will likely focus on bigger, diversified gold miners.
Shares of one of the leading gold miners, Barrick Gold, are already up by about 30% year-to-date, but they have a good chance to gain additional upside momentum in case gold moves out of the current trading range and heads towards the $2000 level.
Barrick Gold is expected to report earnings of $1.26 per share in 2022, so the stock is trading at 20 forward P/E, which looks reasonable for the current market environment.
Newmont stock also had a successful year, which is not surprising for the gold mining stock with the biggest market capitalization in U.S. markets.
Smaller companies have faced various setbacks in recent years, so traders prefer to bet on big diversified companies. Trading at about 25 forward P/E, Newmont is not cheap, but the market is willing to pay a premium for the leading gold mining stock.
It is not clear whether the stock is ready for multiple expansion, but higher gold prices will drive earnings estimates higher and should provide support to the stock.
Agnico Eagle Mines
Here’s another gold mining stock which is not cheap but will have plenty of upside in case gold manages to get out of the current range and move closer to the $2000 level.
Agnico Eagle Mines is even more expensive than Barrick Gold and Newmont, but it will also benefit from the flow of funds into the segment as there is a limited number of big companies in the marketplace, and investors prefer to bet on strong names.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire