Raymond James: Time to Buy Gold Stocks


"Fundamentals sound with gold outperforming most other asset classes."

Raymond James precious metals analysts say now is the time for investors to take advantage of the current precious metal price weakness and accumulate gold and silver equities ahead of the typical fall rally.

Raymond James analysts noted, "History has shown that August can provide an excellent buying opportunity in the precious metals space prior to the typically stronger second half." Key factors attributed to this seasonality include Indian demand driven by the harvest, wedding and festival season; festival season demand ahead of the North American holiday season; and Chinese New Year celebrations.

Based on historic patterns, the analysts found the gold price returning, on average, 13% between mid-August and the end of the year during the last eight years. "We believe the precious metals equities will continue to offer additional leverage, as has been the case historically, with the HUI index returning, on average, 21% over the same period."

"Based on pure fundamentals, our top picks at current levels include Eldorado (for its increasing production and declining cost profile), Agnico-Eagle (recent sell off represents an attractive entry point), Alamos (top quartile profit margins, attractive long-term growth profile), CGA (discounted valuation despite a smooth ramp up year) and Guyana Goldfields Inc. (TSX:GUY) (moving down the de-risking path and potential takeout candidate)," Raymond James recommended.

Raymond James' data found the gold price has followed a familiar trajectory"—performing well in the late winter months, weakening in the late spring/summer, strengthening again in the fall.

"Furthermore, we believe long-term fundamentals remain sound with gold outperforming most other asset classes in a deflationary environment, as a hoarding vehicle or an inflationary environment," the analysts forecast. "We believe, given the unprecedented monetary and fiscal easing, that the ultimate result will be a period of prolonged inflation in the coming years."

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