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Gold miners shine as weak economic outlook clouds mood in 2019

Gold-related shares turn attractive as volatility hammers investors in financial markets

Gold bars and the dollar.
Investors typically flee to safe havens such as precious metals when equities markets turn volatile

Gold company stocks vaulted higher Thursday, bolstered by a glum economic outlook for 2019 and financial market volatility that has driven investors to a more reliable asset.

Since October, stocks have churned lower in a steep selloff and there seems no indication the trend will abate once 2019 arrives.

US stocks continued the decline Thursday following a fourth interest rate increase by the US Federal Reserve in 2018 that seemingly underscored a weak economic outlook going into 2019.

Investors typically flee to perceived safe havens such as precious metals and gold-related stocks when equities markets turn volatile.

“We see equity market volatility as a feature in 2019," ANZ senior commodity strategist Daniel Hynes and commodity strategist Soni Kumari said in a 2019 commodities outlook from the Australian bank.

READ: Rockfire Resources surges as it identifies “outstanding gold target” at Kookaburra project

In Thursday trading, IAMGOLD Corp (NYSE:IAG) jumped 10% to $3.72, while AngloGold Ashanti (NYSE:AU) added 5.8% to $12.47 in morning trading.

Meanwhile, the iShares S&P/TSX Global Gold ETF (CSE:XGD), which tracks global gold miners, was recently up 3.4% to $11.20 in trading on the Toronto stock exchange. Gold was up 0.3% to $1,255.90 per ounce.

"Gold ETF inflows are recovering and we expect to see a net inflow in 2019," the two added. “Bar [and] coin demand recovered strongly in Q3 2018, amid currency weakness and equity market correction. We see lower prices incentivizing jewelry and central bank purchase.”

That upcoming strength for the yellow metal appears to be driving shares of gold companies. Stocks in a number of gold companies rose anywhere from 5% to 10%.

Gold Fields Ltd (NYSE:GFI) sprang up 8.3% to $3.39, and Harmony Gold Mining Company Ltd (NYSE:HMY) added nearly 8% to $1.76.

Looking for a safe haven

"There is some safe-haven buying supporting gold prices," Renisha Chainani, head of commodity and currency research at Monarch Networth Capital, told CNBC. "Overall there is risk-off sentiment in the market."

While there is a 90-day trade truce between the US and China, market volatility could keep the prices of gold the gold companies on the boil.

Hynes and Kumari said a return to trade tensions between Washington and Beijing along with weakness in stock markets could see "investors turning to gold to diversify portfolios.”

Contact Rene Pastor by [email protected]

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