Fed Rate Cut Fuels Gold’s Rise: How the Rally Works

Federal Reserve Bank recently 50bp interest rate cut It triggered a surge in gold prices. Gold medal, breaking all-time record Highest price per ounce: $2,635.29 On Monday, it was up nearly 29% year to date. This surge has significantly increased gold’s appeal as an attractive asset for investors.

Investors often turn to gold as a safe haven during times of uncertainty. An inverted yield curve, with short-term bond yields higher than long-term yields, is adding to fears of a recession, driving more investors into gold. In volatile markets, gold provides a way to diversify your portfolio, protect against inflation, and hedge against a wide range of market risks.

To participate in this rally, investors can look at the following gold ETFs: SPDR Gold Stock (GLD) and VanEck Gold Mining ETF (GDX)These provide exposure to gold prices and gold mining companies respectively. In addition, the following stocks Newmont Corporation (NEM) and Franco-Nevada Corporation (FNV) It is well positioned to profit from gold’s continued rise, making it a solid choice for those looking to capitalize on the ongoing gold rush.

ETFs to buy:

SPDR Gold Stock (GLD)

GLD is a popular exchange-traded fund (ETF) that aims to mirror the performance of gold bullion prices before fees and expenses, giving investors a way to track the value of gold without physically holding it. . Managed by World Gold Trust Services, LLC, GLD invests primarily in gold, making it a convenient and efficient vehicle for those seeking exposure to commodity markets. It can be used as a short-term position as a hedge against stock market volatility and inflation.

As of September 24, 2024, the fund had assets under management (AUM) of $74.32 billion. NAV $243.58. GLD’s expense ratio of 0.40% is lower than the category average of 0.48%. Fund inflow over the past three months reached $4 billion, and $759.19 million last year. Additionally, the ETF’s beta is 0.11, indicating that it is relatively more stable than the overall market.

In terms of price performance, the ETF has surged nearly 38% over the past year and more than 28% year-to-date.

VanEck Gold Mining ETF (GDX)

GDX seeks to replicate the performance of the NYSE Arca Gold Miners Index before fees and expenses. Non-diversified funds typically invest 80% of their total assets in depository receipts and common stocks in the gold mining industry, providing ‘indirect’ exposure to the price of gold.

GDX has total net assets of $15.95 billion. best holding include Newmont Corporation (NEM) It came next with a share of 15.25%. Agnico Eagle Mines Limited (AEM) 10.05%, and Barrick Gold Corporation (GOLD) and Wheaton Precious Metals Co. (WPM)They are 8.69% and 6.89%, respectively. We currently have a total of 59.

The fund pays an annual dividend of $0.50, which represents a yield of 1.21% at prevailing price levels. Dividend payments have grown at an impressive CAGR of 38.1% CAGR over the past three years and 36.6% CAGR over the past five years. Additionally, the fund’s four-year average return is 1.32%.

GDX’s fund inflow over the past five days was $104.35 million, and last month it was $438.16 million. It also has an expense ratio of 0.51%, compared to the category average of 0.48%. that The ETF’s NAV was $41.24. As of September 24, 2024. What’s more, it’s up more than 43% over the past year and nearly 34% year-to-date. Also the beta version is 0.99.

Stocks to Buy:

Newmont Corporation (NEM)

Newmont is the world’s leading gold miner and producer of copper, silver, zinc, lead and other precious and industrial metals. NEM has the largest gold reserve base in the metals mining industry, backed by world-class ores in top locations.

NEM’s fiscal year revenue increased 64.1% year over year to $4.4 billion. 2nd quarter This expires on June 30, 2024. Net cash from operating activities increased 112.5% ​​year over year to $1.39 billion. NEM’s adjusted net income was $834 million, or $0.72 per share, an improvement of 213.5% and 118.2% year over year. Additionally, Adjusted EBITDA increased 116% year-over-year to $1.97 billion.

During the quarter, NEM produced 1.61 million attributable ounces of gold and 477,000 gold equivalent ounces (GEO) from copper, silver, lead and zinc. This growth was primarily driven by 1.31 million gold ounces produced from Newmont’s Tier 1 portfolio.

Analysts expect NEM’s third-quarter revenue (ending September 2024) to hit $4.64 billion, up 86.2% year-over-year, and EPS for the same period is expected to hit $0.80, up 121.9% year-over-year. do. It’s also surpassed EPS and revenue estimates in three of the last four quarters, which is impressive.

NEM’s stock is already up more than 65% in the past six months and has returned nearly 35% year to date.

Franco-Nevada Corporation (FNV)

Headquartered in Toronto, Canada, Franco-Nevada is a gold-focused royalty and streaming company with operations in South America, Central America, Mexico, the United States, Canada, and internationally. Operating through the Mining and Energy sectors, the company manages a portfolio primarily focused on precious metals, including gold, silver and platinum group metals.

On August 13, the company declared a quarterly dividend of $0.36 per share, payable to shareholders on September 26, 2024. The four-year average dividend yield is 0.93%, and the current dividend of $1.44 translates to a 1.12% yield. We provide consistent returns to investors. Also, the payout ratio is 42.2%.

during an accounting period 2nd quarterFor the year ended June 30, 2024, FNV reported total revenue of $260.1 million and total profit of $178.1 million. The company achieved an adjusted EBITDA margin of $221.9 million, with a margin of 85.3% compared to an adjusted EBITDA margin of 83.5% in the prior-year quarter. During the same period, FNV’s adjusted net income was $144.9 million, or $0.75 per share. Additionally, cash and cash equivalents at the end of the period were $1.44 billion, an 11.1% increase from the previous year.

The Street expects FNV’s revenue and EPS to reach $1.13 billion and $3.32, respectively, for the year ending December 31, 2024. During fiscal 2025, revenue is expected to grow 13.7% year over year, reaching $1.29. 1 billion. Additionally, EPS is expected to be $3.87, up 16.3% year-over-year.

The company’s strong growth prospects are driven by mine expansions and new mine starts, with up to nine new mines expected to contribute from 2024 to 2028. FNV also holds significant long-term options on gold, copper and nickel, with exposure to approximately 66,800. square kilometers of mineral-rich territory.

Moreover, FNV’s stock price is up more than 8% in the past three months and is up almost 16% since the beginning of the year.

conclusion

The long-term outlook for the yellow metal looks bright: The gold market is expected to increase to 6.32 kilotons by 2029. Average annual growth rate of 7.4%. So you can take advantage of the surge without having to physically own it through gold stocks (e.g. NEM and FNV) or convenient gold ETFs like GLD and GDX.