There was no ambiguity this week from Federal Reserve Chair Jay Powell, as he and the rest of Washington had to finally face the music over spiraling inflation caused in part by the rampant government spending spree that has taken inflation to the highest levels in over 40 years. The 8.6% increase in the May consumer price index inflation rate, combined with the 6% increase in the core number that excludes food or energy, was enough to bring out the interest rate bazooka. It delivered a 75-basis-point increase for the first time since November of 1994, and it may be poised to offer the same in July.
The question for investors is what to do now? One of the best ideas always has been to seek positions in commodities. The best area for investors to look at may be the top gold miners and royalty companies. The bonus for investors is that the sector surprisingly has taken a big hit over the past few months and is offering the best entry points this year.
We screened the BofA Securities gold mining research universe looking for the top stocks and found seven that are rated Buy, pay very respectable dividends and look like great ideas now for worried investors. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Agnico Eagle Mines
This is one of Wall Street’s most preferred North American gold producers. Agnico Eagle Mines Ltd. (NYSE: AEM) is a senior Canadian gold-mining company that has produced precious metals since 1957. Its eight mines are located in Canada, Finland and Mexico, with exploration and development activities in each of these regions, as well as in the United States and Sweden.
The company and its shareholders have full exposure to gold prices due to its long-standing policy of no forward gold sales. The stock has been crushed as gold has sold off last year’s highs. And with a surge of inflation, you can bet many savvy portfolio managers are ready to add back top companies like this. Agnico Eagle has declared a cash dividend every year since 1983.
Shareholders now receive a 3.11% dividend. The BofA Securities price target on Agnico Eagle Mines stock is $73. The consensus target is higher at $93.41, and shares closed almost 5% higher on Thursday at $51.46.
Barrick Gold
This is another top gold stock, and it still offers a solid entry point. Barrick Gold Corp. (NYSE: GOLD) and Randgold Resources completed their merger on January 1, 2019. This created the world’s largest gold company in terms of production, reserves and market capitalization.
The company holds a 50% interest in the Veladero mine located in the San Juan Province of Argentina; 50% interest in the KCGM, a gold mine located in Australia; 95% interest in Porgera, a gold mine located in Papua New Guinea; 50% interest in the Zaldavar, a copper mine located in Chile; and 50% interest in the Jabal Sayid, a copper mine located in Saudi Arabia.
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