Heading into earnings season, Canaccord Genuity’s precious metals analysts remain bullish on gold despite a recent pullback in price
“The market is pricing in a final 25 basis points Fed funds hike at this week’s FOMC meeting and expecting rate cuts in 2024 which we view as positive for gold,” they said in a Monday report. “Overall, while the incoming economic data has at times been volatile, the overall trends of economic growth, inflation, and job growth continue to slow. The yield curve remains deeply inverted and the question of whether we get a soft or hard landing remains open, in our view. The New York Fed estimates a 67-per-cent chance of recession in the next 12 months.
“Despite the recent pullback, gold is up 8 per cent year-to-date and the S&P/TSX Gold index is up 7 per cent (in US$ terms). Under the surface however, we see more robust performance lead by the intermediate producers (22.9-per-cent median) and royalties (up 7.6 per cent) vs. the senior producers (up 1.0 per cent) and we note that approximately half of our coverage universe have posted double-digit gains for the year so far. Top performers YTD include K and EDV among the seniors, EQX, DPM, LUG, ELD, NGD, TXG, AGI, CG, CXB, and ORA (all up more than 20 per cent) among the intermediate/juniors, and OR and WPM among the royalty/streaming companies. Equity valuations remain inexpensive, in our view, with the senior producers trading at 0.69 times NAV below their historical average of 0.85 times and slightly below the lower end of the 0.71-0.99 times range (+/- 1.5 std deviations). The royalty companies are roughly trading in line with their historical average at 1.53 times NAV (average of 1.56 times).”
After the firm trimmed its gold price deck by approximately 2 per cent and silver assumptions by 4 per cent, the analysts made a series of target price adjustments.
For senior producers, their changes are:
- Agnico Eagle Mines Ltd. ( “buy”) to $91 from $99. Average: $90.10
They added: “CG precious metal top picks: Senior Producers: Endeavour Mining, Agnico-Eagle, Kinross, SSR Mining; Intermediate/Junior Producers: New Gold, Orezone Gold, Aris Mining, Calibre Mining; Royalty/streaming companies: Osisko Gold Royalties, Wheaton Precious Metals.”