Gold consolidates recent gains as markets roll into Christmas

By Staff Writer / December 21, 2019 / Article Link

As markets are rolling into the holiday season, Friday saw Canada’s main stock index edge higher. This comes right after news from China about cancelling tariffs, which is scheduled to take effect on Sunday and an agreement on the first phase of a trade deal between US and China.

At 09:47 a.m. ET (14:47 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 11.06 points, or 0.07%, at 16,957.96. The materials sector, which includes precious and base metals miners and fertilizer companies, added 0.3%.

Gold prices moved forward $1.80 at $1,480.50 U.S. an ounce with the yellow metal posting its first daily gains on the previous day mainly due to the weaker USD. This follows the recently mixed trade/positive headlines, which seem to have capped the price recovery.

At this point, the benchmark PHLX Gold/Silver Index (XAU) shows recovery from nearly all of its losses from the September-October decline. Many analysts are pointing out that the short-term internal momentum profile for the gold miners has a bullish implication for the near-term future of the leading large-cap mining stocks.

As demand for gold stocks remains strong, only recently have we seen aggregate gold stock prices – particularly those for the senior and mid-tier producers – to edge steadily higher. The short-term momentum of the new highs and lows has continued to rise and is now back into positive territory for the first time in months.

Gold stocks are in a good place from a technical perspective, warranting a bullish short-term outlook for gold stock traders. A few Canadian junior gold mining stocks are sporting some of the most impressive forward earnings forecasts among all industry groups.

News of several new consolidations and mergers saw the gold stocks of several junior gold miners rally this week. The most notable move came from Equinox Gold Corp. (EQX) EQX, +3.65% ("Equinox Gold") and Leagold Mining Corporation (LMC)(otcqx:LMCNF) ("Leagold"). The two junior gold miners announced a definitive agreement to combine in an at-market merger, resulting in the creation of one of the world's top gold producing companies operating entirely in the Americas. The combined entity will continue as Equinox Gold and be headquartered in Vancouver, Canada. As part of the Transaction, Ross Beaty will subscribe for $40 million in a private placement of Equinox Gold common shares at a price of C$8.15 per common share to maintain an approximate 9% stake in the company.

Promising performance results come from one of the most important of the blue-chip mining companies, Newmont Goldcorp Corp. (NEM) as well. The major gold producer also exhibits a pattern of estimated earnings-per-share growth over the last few quarter.

In summary, the near-term outlook for many of gold mining stocks and the sector as a whole reflected in the PHLX Gold/Silver Index is an optimistic one. Rising internal momentum, coupled with a lagging gold price and a decline in the intermediate-term internal momentum indicator are sufficient to support a continued bullish outlook.