Despite signs of easing, inflation is still well above the Fed’s 2% target. With the rising likelihood of further interest rate increases, investors could explore resilient gold stocks Kinross Gold Corporation (KGC), B2Gold Corp. (BTG), and Dundee Precious Metals Inc. (DPMLF) to mitigate the impact of inflation and secure solid returns.
Let’s understand in detail.
May witnessed the 11th consecutive slowdown in inflation, as the year-over-year rate dropped from 4.9% to 4%. However, core inflation, a better gauge of underlying inflation, remained high at 5.3% annually. The month saw core inflation rise by 0.4%, maintaining a consistent monthly average of 0.4% throughout 2023.
Despite inflation showing signs of cooling, it still exceeds the Federal Reserve’s target of 2%. Fed Chairman Jerome Powell clarified that the interest rate hike pause in June was a temporary break, not the end of the hiking cycle. In fact, he emphasized the likelihood of future interest rate increases to come.
That said, Fed officials predict a cumulative 0.5 percentage point rise by year-end, indicating two more quarter-point hikes. According to CME’s FedWatch tool, traders are pricing an approximately 90% chance of a 25-basis-point hike in the July meeting after last month’s pause. The Fed’s key borrowing rate currently hovers between 5% and 5.25%.
Given the prospect of further rate hikes, investors could consider investing in gold. Gold is widely renowned as a “safe-haven” asset that maintains its value and liquidity during periods of economic uncertainty. Investors frequently seek refuge in stable assets such as gold, which provides a hedge against inflation and an economic downturn.
Gold is trading at approximately $1,920 per ounce, closely hovering near its lowest level over three months. Gold, similar to other commodities, can be subject to considerable price fluctuations within short timeframes. Nonetheless, it is generally regarded as an exceedingly stable investment option when observed over the long term.
In addition, an important trend to monitor would be central banks’ continuous gold purchases. In 2022, central banks made record net gold purchases, acquiring 1,079 metric tons for their official reserves. This marked the 13th consecutive year of net buying, according to data from the World Gold Council.
The upward momentum continued into the first quarter of 2023, with central banks purchasing 228 metric tons. The continued increase in buying by central banks might contribute to a boost in gold prices.
Against this backdrop, investing in fundamentally strong gold stocks KGC, BTG, and DPMLF could be wise this month for stable returns.
Let’s examine in detail what makes the featured stocks worthwhile investments.
Kinross Gold Corporation (KGC)
Headquartered in Toronto, Canada, KGC engages in acquiring, exploring, and developing gold properties. Additionally, it is involved in the production and sale of silver, the extraction and processing of gold-containing ores, and the reclamation of gold mining properties.
On February 13, KGC announced a robust initial mineral resource estimate for the Great Bear project, comprising 2.7 Moz indicated and 2.3 Moz inferred. The continuity of high-grade deposits at depth solidifies the company’s vision of developing a high-quality open pit and substantial underground mine.
It has also reinforced the KGC’s expectation that Great Bear will emerge as a top-tier, premier asset in its portfolio, delivering long-term value and growth opportunities for shareholders.
For the first quarter that ended March 31, 2023, KGC’s metal sales increased 32.6% year-over-year to $929.30 million. Its gross profit grew 36.3% from the year-ago value to $233.50 million. Also, adjusted net earnings from continuing operations attributable to common shareholders rose 27.3% year-over-year to $87.60 million.
In addition, the company’s adjusted net earnings per share from continuing operations came in at $0.07, reflecting an increase of 40% year-over-year.
The consensus revenue estimate of $4.05 billion for the fiscal year (ending December 2023) reflects a 17.3% year-over-year improvement. Likewise, the consensus EPS estimate of $0.36 for the ongoing year indicates a 61.5% rise year-over-year. The stock has gained 41.8% over the past year to close the last trading session at $4.75.
KGC’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
KGC has an A grade for Growth and a B for Value. It has ranked #8 in the 40-stock Miners - Gold industry.
In addition to the POWR Ratings I’ve just highlighted, you can see KGC’s ratings for Stability, Quality, Momentum, and Sentiment here.
B2Gold Corp. (BTG)
BTG, based in Vancouver, Canada, operates as a gold producer with three mines in Mali, the Philippines, and Namibia. It runs the Fekola Mine in Mali, the Masbate Mine in the Philippines, and the Otjikoto Mine in Namibia. The company also has a portfolio of exploration and evaluation properties in Finland, Uzbekistan, and Mali.
On June 21, BTG disclosed a substantially augmented and revised Mineral Resource estimate for the Anaconda Area, encompassing the Menankoto, Bantako North, and Bakolobi permits. The latest evaluation shows a notable increase in the oxide mineral resources and a preliminary estimate of the sulfide-indicated mineral resource.
This could boost BTG’s resource potential and open doors for future extraction and profitability.
Also, on April 19, BTG completed the acquisition of all outstanding common shares of Sabina Gold & Silver Corp, gaining ownership of the Back River Gold District in Nunavut, Canada. The district encompasses five mineral claim blocks spanning 80 kilometers. This acquisition should strengthen BTG’s position as a low-cost, responsible senior gold mining company.
For the first quarter that ended March 31, 2023, BTG’s gold revenue grew 29.5% year-over-year to $473.56 million. Its gross profit rose 53% from the year-ago value to $213.63 million. Furthermore, the company’s adjusted net income and EPS increased 62.6% and 66.7% year-over-year to $105.86 million and $0.10, respectively.
BTG’s revenue is expected to grow 11.2% year-over-year to $1.93 billion for the fiscal year ending December 2023. The company’s EPS is expected to come in at $0.32 for the current year, indicating a 28% rise year-over-year. Over the past year, the stock has gained 8.3% to close the last trading session at $3.52.
BTG’s strong outlook is reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
BTG has a B grade for Growth, Value, and Sentiment and Quality. It has ranked #5 out of 40 stocks within the Miners – Gold industry.
Click here to access additional BTG ratings (Stability and Momentum).
Dundee Precious Metals Inc. (DPMLF)
DPMLF, based in Toronto, Canada, acquires mineral properties and explores, develops, mines, and processes precious metals. It owns and operates a gold, copper, and silver mine east of Sofia, Bulgaria; a gold mine near Krumovgrad in southeastern Bulgaria; and a custom smelter in Tsumeb, Namibia.
On April 10, DPMLF reported new assay results from ongoing drilling at Serbia’s Čoka Rakita prospect, revealing mineralization extension and confirming high-grade continuity. This progress should strengthen DPMLF’s outlook, with increased resource potential and expanded exploration activities contributing to long-term profitability for the company.
On February 27, DPMLF reported the 2022 diamond drilling findings for the Tierras Coloradas concessions in Ecuador’s Loja province. The results demonstrate favorable vertical continuity in the Aparecida veins, which extend further downwards and toward the east.
The La Tuna vein system exhibits greater complexity and lower continuity but presents opportunities for expansion in various directions. These positive findings could bode well for the company by enhancing the resource potential and paving the way for further exploration and potential economic gains.
DPMLF’s revenue for the first quarter that ended March 31, 2023, increased 1.3% year-over-year to $155.83 million. Its adjusted net earnings and adjusted EPS grew 24.6% and 26.3% year-over-year to $46.14 million and $0.24, respectively. Also, the company’s free cash flow rose 24.2% from the prior year’s quarter to $65.03 million.
Analysts expect DPMLF’s revenue to increase 40.9% year-over-year to $189.55 million for the fiscal second quarter that ended June 2023. The company’s revenue for the third quarter (ending September 2023) is expected to grow 48.1% from the prior year’s quarter to $190.50 million.
Shares of DPMLF have gained 32.1% over the past six months and 43.1% over the past year to close the last trading session at $6.79.
DPMLF’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
DPMLF has an A grade for Stability and Quality and a B for Growth and Value. It has ranked #2 out of 40 stocks within the same industry.
Click here to access additional DPMLF ratings for Momentum and Sentiment.
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KGC shares were trading at $4.60 per share on Thursday afternoon, down $0.15 (-3.16%). Year-to-date, KGC has gained 14.13%, versus a 15.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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