What's Next For Gold Investors?

In a new report, BMO Capital Markets analyst Andrew Kaip discusses the opportunity that BMO sees coming in the next market cycle for gold miners. Kaip believes that the cost cutting and improvement to balance sheets over the past two years have built the foundation for strong growth as gold miners enter their next market cycle.

Second stage of optimization
According to Kaip, gold miners have now completed the first of two stages of optimization. The completed stage includes cuts to management, reduction in operational costs and adjustments to budgets and planning based on lower gold prices.

Now that the first stage of optimization is complete, Kaip believes that miners are now entering the second stage.
“This second round of optimization is focused on further benefits derived from procurement strategies that should improve consumable costs and reduce inventories, detailed mine-by-mine reviews targeting further improvements in sustaining capital and operating costs and implementation of internal hurdle rates on new capital programs that will lead to further reductions on capital programs,” Kaip explains.

Gold outlook
BMO’s optimism when it comes to gold miners has little to do with the spot price of gold. BMO is currently calling for gold prices of $1,180 per oz in 2016, nearly in-line with the current price.

Stock picks
BMO believes that a rebound in investor interest in gold is coming in the second half of 2015, and investors that wish to capitalize on the rebound should be buying gold mining stocks throughout the summer.

The report also included BMO’s fresh coverage initiation on several gold mining stocks. BMO’s top stock picks are Barrick Gold Corp ABX and Goldcorp Inc GG.
 

BMO also set Market Perform ratings on the stocks of Agnico Eagle Mines Limited AEM, Kinross Gold Corp KGC and Yamana Gold Inc AUY.