A lot of traders and analysts are bullish on gold. JPMorgan Chase (NYSE:JPM) just issued a new forecast that predicts the price of gold will hit record levels in 2024. Analysts at JPM are urging investors to take a position in gold ahead of a likely U.S. recession, predicting that the price of the precious metal will rise above $2,000 an ounce by year end and hit record highs in 2024 as interest rates begin to fall. JPMorgan has placed a price target on gold of $2,175 an ounce by the fourth and final quarter of 2024 amid calls for a mild recession. In May of this year, the price of gold approached a record high of $2,075.47 an ounce before pulling back to its current level of $1,960 an ounce. JPMorgan sees a coming drop in interest rates as a potential catalyst for gold, which should play out in the second quarter of next year.
While the bullish outlook is encouraging, it doesn’t mean that investors should rush out and put capital in any gold stock they find. Many gold producers are poorly run and have shoddy track records, and their stocks have proven to be bad long-term investments. Here are three high-risk gold stocks you shouldn’t touch with a 10-foot pole.
Barrick Gold (GOLD)
It’s been a bad year so far for Barrick Gold (NYSE:GOLD). The Canadian miner began 2023 by announcing in February that it was cutting its quarterly dividend by 33% to 10 cents a share. Then in April, the company announced that its first-quarter gold production fell 15% as winter weather and annual maintenance hurt operations at its various mine sites. In May, Barrick reported abysmal Q1 earnings, announcing that its profit was 73% lower than a year earlier at $120 million.
All the bad news has led GOLD stock to decrease 5% year-to-date as the benchmark S&P 500 index has advanced 20%. The company has said that it expects production of both gold and copper, which it also mines, to increase throughout this year. However, shareholders clearly aren’t waiting for a turnaround, with many hitting the “sell” button on the stock. Worth noting is that Warren Buffett had taken a $565 million position in GOLD stock in 2020 but quickly sold his entire stake in the company. Clearly, it’s one of the high-risk gold stocks to avoid.
Kinross Gold Corp. (KGC)
Another Canadian gold miner that is not worth investors’ capital is Kinross Gold Corp. (NYSE:KGC). While KGC stock looks to be on an upswing having gained 13% this year, the long-term trend is ugly. Currently, KGC trades as a penny stock, i.e. below $5 per share. While the share price has risen this year, it is currently trading at half the level it was at in 2020 when the onset of the Covid-19 pandemic sent many investors running to the relative safety of gold.
Look any further, and you’ll find KGC stock has performed even worse. Kinross Gold’s share price hit an all-time high of just under $30 back in 1996. Since then, the stock has steadily eroded, sliding into penny stock territory. The problems afflicting the stock have included poor financial results and declining profitability relative to other gold miners. The company announced in 2022 that it was selling its Russian gold mining assets to privately held Highland Gold Mining Ltd. for $680 million in cash. But that sale was eventually completed at half the agreed-upon price. Add KGC to your list of high-risk gold stocks that won’t be worth your while.
Newmont Corp. (NEM)
Colorado-based Newmont Corp. (NYSE:NEM) might be the largest gold miner in the world, but that fact hasn’t helped its share price lately. Since January, NEM stock has declined 14% — this in the middle of a bull market. Over the last five years, the stock has gained a middling 16%, making it one of the least favorable gold stocks. Disappointing output at the company’s gold mines, coupled with poor earnings, have pressured the stock.
Newmont just announced Q2 results for this year that showed its gold production fell 17% to 1.24 million ounces due to a labor strike in Mexico and the shutdown of mine sites in Canada due to ongoing wildfires. As a result, revenue in the quarter declined 12% from a year earlier while earnings per share dropped 28% to 33 cents. Newmont is now finalizing its $17.8 billion acquisition of Australian gold miner Newcrest Mining (TSE:NCM), which is still subject to shareholder approval. This casts a cloud of uncertainty over the company, resulting in an unstable gold stock at best.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
