Although a hero to working class conservatives and political outsiders, President Donald Trump has put them in an awkward situation. Consider that when Trump was campaigning, he did an interview with Alex Jones. Yes, that Alex Jones of the 9/11 truther movement and other controversial conspiracy theories. Often hawking alternative investments like gold stocks, Mr. Jones represents many of the hardcore supporters of the Trump administration.
The question, though, is what happens when conspiracy theorists get what they want? Is there really a need for loading up the boat with gold stocks or gold miners if the president is one of the “good guys?” This year, “the good guy,” against some incredible odds, actually pulled off the White House victory.
While that’s exactly what Donald Trump supporters wanted, it’s also a double-edged sword. The country is better off, but the impetus to buy gold — societal or economic disaster — is gone. And if demand isn’t there, supply rises, and that causes prices to go south.
During the Obama administration, gold prices moved up roughly 30%. However, during his first term, gold gained approximately 70%. That situation made a lot of sense as alternative investors worried about the rising national debt. But with Trump promising a new vision of America, have gold stocks lost their luster?
Hardly! We have a most unpredictable leader on our hands. Even insiders don’t know what Donald Trump will say, do or tweet. Rather than the bastion of stability and transparency, this administration is a crapshoot. We only need to look at the executive order effectively producing a refugee ban to see just how volatile things can be.
While this may not be what some supporters signed up for, the good news is that gold stocks — in particular, gold mining stocks — are ripe for trading. Rather than being a gold headwind, President Trump could be the catalyst for the next rally. Here are seven gold stocks that will shine again!
Gold Stocks: SPDR Gold Trust (GLD)
However, that figure doesn’t do the incredible rise and fall of the GLD justice. At one point, the ETF was up 27% a little past the midway point. From there, though, gold stocks just couldn’t find stable ground.
Interestingly, the GLD was one of the biggest losers of the Donald Trump victory. Between Nov. 8 through the end of 2016, the GLD lost 10% of market value. Even heavier losses were seen among leading gold mining stocks. Perhaps investors were hedging their bets with gold in the then likely scenario that Hillary Clinton would become president. The sharp losses in the GLD is a reflection that the election results surprised virtually everyone.
However, 2017 is off to a great start. Already, the GLD is up 5%, almost returning the same profit it did for the entirety of last year. The best part is that this rally appears to be fundamentally based. The markets are unsure how to digest the Trump administration. Practice time — i.e., the campaign cycle — is over. This is the real deal.
Just the sheer uncertainty of this is enough to bolster the GLD and gold stocks for at least the next four years.
Gold Stocks: Randgold Resources (GOLD)
Still, prospects look very promising for GOLD in 2017 and beyond. Since November, a number of very well-known analyst firms have upgraded their ratings of the company. The reason isn’t just limited to speculation for the underlying asset. Compared to many other gold mining stocks, Randgold has significant stability in the balance sheet. Its profitability margins are also among the best in the industry.
The robust nature of Randgold’s financials will help it navigate any water, rough or smooth. However, GOLD investors have to be encouraged by what they’re seeing. Year-to-date, shares are up more than 21%, similar to the bullishness seen in early 2016. Furthermore, the precious metals complex are posting solid performances, which is lifting all gold miners.
Nevertheless, the sector is notorious for volatility. Investing in a top-tier name like Randgold helps to ensure a much more tolerable ride.
Gold Stocks: Goldcorp (GG)
All in all, 2016 was a comparative disappointment at 15.6% up. It’s better than nothing, but this underperformed several competing gold stocks.
Fortune may be smiling yet for GG, however. On a YTD basis, GG stock has gained nearly 23%. This not only beats its returns for all of last year, Goldcorp is ahead of many other gold miners. Additionally, since mid-December, GG has jumped to a 33% lead in the markets. Again, this is a tough feat to follow among larger capitalized gold stocks.
One of the fundamental advantages that Goldcorp has compared to the rest of the industry is location. Specifically, the company’s projects are centered in the western hemisphere — Canada, the U.S., Mexico and the rest of the Americas. At the very least, GG has less exposure to geopolitical flashpoints as its regions of operation are mostly stable.
The markets are taking notice, making GG one of the smarter risks among gold mining stocks.
Gold Stocks: Sibanye Gold Ltd (ADR) (SBGL)
If they didn’t, their gold stocks turned into a nightmare. Even in gold-endowed nations, the schizophrenia was evident, perhaps even worse than their North American counterparts. Just ask South African-based Sibanye Gold Ltd (ADR) (NYSE:SBGL).
Between the beginning of 2016 up until late summer, SBGL stock jumped an earth-shattering 240% in the markets. In fact, on Aug. 10, when SBGL closed at a cool $20.50, it achieved an all-time record. The enthusiasm unfortunately was short lived. Sibanye tumbled on Aug. 19, and since then, things have never looked the same. SBGL would go on to lose a disheartening 64%.
It was clear that investors were looking for a boost from the U.S. elections. On Nov. 9, SBGL gapped up nearly 5%. But the Dow Jones Industrial Average also responded positively to Donald Trump’s victory, and that was that for gold stocks. However, the “Trump uncertainty” trade is back on the table with controversy after controversy. SBGL is up 25% YTD, potentially setting up a very strong 2017.
Gold stocks typically don’t do well without some kind of catalyst. Luckily, SBGL has Donald Trump — what more could you ask for?
Gold Stocks: Harmony Gold Mining (HMY)
The end result is an investment that, by the numbers, is painfully pedestrian. Consider that the benchmark S&P 500 gained over 11% last year. Anything remotely near that figure is a disappointment for gold mining stocks, which were well hyped.
HMY, though, is a different animal altogether. Although it definitely charted a volatile look in 2016, HMY still put out damn good results. We’re talking a massive profit of more than 110% here. This held despite the fact that HMY lost nearly 54% between August through the end of December. True, Harmony Gold set the standard with a 241% move in the first half of last year. Still, posting a triple-digit return when the competition is barely keeping pace with equity benchmarks is a pretty big deal.
For 2017, I’m expecting more of the same. Indeed, with so much concern baked into the Trump administration, there’s plenty of reasons to get into gold. And what better company to feed the demand than Johannesburg-headquartered Harmony Gold? If anything, HMY is getting off to a great start, up more than 24% YTD.
As we head deeper into the unknown, it’s time to harmonize with HMY!
Gold Stocks: Pershing Gold (PGLC)
Speculative names like Pershing Gold Corp (NASDAQ:PGLC) are often built on potential, and little else. Maybe they’ll turn a profit on their gold mines, or maybe they won’t. There’s no middle ground, no buffer to help cushion the blow should things go awry.
I can’t stress enough how crazy volatile gold stocks, especially speculative gold stocks, can be. But if you’re well aware of the risks, PGLC might be a name to look into. The financials for PGLC look (and smell) like horse manure — I won’t lie. At the same time, PGLC is one of the rare, small cap gold mining stocks that doesn’t have any debt on its books. That at least demonstrates some discipline in its business strategies.
I especially like the contrarian trade for PGLC. Unlike other gold stocks, Pershing actually fell negative for 2016, down 7.4%. Also, it’s starting off this year on a bum note, moving underwater to the tune of 1.5%. However, the rest of the industry is doing very well. Thus, PGLC is a gamble that the underlying asset will lift the tide for everyone.
If you’re looking for a gold investment that has yet to begin its stride, PGLC is right up your alley!
Gold Stocks: Nippon Dragon Resources (RCCMF)
Really, there’s no other way to classify equity ownership that goes for less than six cents a pop. And don’t even bother trying to look up RCCMF on Stockcharts.com. It’s listed over-the-counter, so it might as well not even exist.
With these caveats out of the way, RCCMF is the most unique name among gold mining stocks because it’s a hybrid mining and technology company. Nippon Dragon utilizes a patented and proprietary thermal fragmentation process that is far more efficient in extracting precious metals than traditional methodologies. More importantly, this revolutionary technology allows for the reactivation of previously dead mines, or those deemed economically unfeasible.
Thermal fragmentation also has another application — controlled destruction. In traditional platforms, the blasting process is dangerous, inefficient, and damaging to the environment. Using thermal fragmentation, RCCMF can offer a safer and cleaner solution. Thus, RCCMF isn’t just a play on speculative gold stocks — it has real world utility unrelated to precious metals.
Nippon Dragon could really be sitting on a revolution that will cause us to rethink how we approach mining. For that reason alone, I’m willing to give it a go.
As of this writing, Josh Enomoto was long RCCMF stock.