(Kitco News) – According to the latest CIBC research, interest is once again returning to the precious metal mining sector as companies focus on redistribution to investors in an environment that will continue to experience rising gold prices.
In a report released Thursday, the Canadian bank officially revised upward its forecast for gold, looking for prices for a year average around $ 1,725, up from the previous forecast of $ 1,600 . Market analysts also said they see gold prices averaging around $ 1,800 an ounce in 2021.
” We believe gold and silver are advancing as history seems to repeat itself, with the current crisis that followed the 2008 playbook, as highlighted by a period of Helicopter Money, “analysts said.
Although the bank remains optimistic about silver, it has cut this year’s price forecast to an average of around $ 18 per ounce, down from its previous estimate of $ 19. For 2021, analysts see silver prices on average at $ 19, unchanged from previous forecasts.
Analysts added that rising gold and silver prices are also making mining companies ” attractive to ignore. “
These comments come as the mining sector saw capital return to the sector before first-quarter profits. The VanEck Vectors Gold Miners ETF (NYSE: GDX), which tracks the major producers of precious metals, ended the week at its highest level in seven years. The latest GDX traded at 33.69, up 12% on the week.
CIBC has warned investors that first quarter profits should be haphazard as COVID-19 shuts down the global economy. Since mid-March, many mining companies have had to either stop production due to government orders to close nonessential businesses, or reduce their ability to comply with social distancing orders.
But analysts have said that instead of looking into the complications of COVID-19, investors should pay attention to free cash flow figures and the health of the balance sheet.
” We believe that investors ” the emphasis on fiscal discipline and return of capital is here to stay, at least in the short term, with investors closely monitoring free cash flow profiles, “said CIBC.
Looking at commodity prices, analysts noted that gold is about $ 100 higher than the fourth quarter of 2019, which turned out to be a stellar quarter for the sector.
” At the start of the pandemic, many investors were confused by the significant weakness in share prices in the precious metals sector, which we attribute to short-term investor deleveraging, “said analysts. ” With this exit from weaker positions largely behind us, more bullish prospects for gold and fairly robust balance sheets, the market is going from aversion to operators and to reductions in production of COVID-19 2020, in search of ” greater leverage exposure to commodities via equities. “
The bank said its top picks in the mining sector are Agnico Eagle, Alamos Gold, B2Gold, Barrick Gold, Franco-Nevada, Kirkland Lake Gold, Newmont, Osisko Mining, Pan American Silver, SSR Mining and Wheaton Precious Metals.
” While many of these stocks have posted significant price gains in the past year, we believe there is still room for further improvement through improved free cash flow returns, increased attention to return of capital to shareholders, improvement of quantitative scores and of society. specific catalysts, “said analysts.
Warning: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has done everything possible to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to exchange goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept guilt for loss and / or damage resulting from the use of this publication.