Admittedly, there are not a lot of gold bugs out there right now. This makes sense, since most investors chase profits when the shine on the precious metal is dull. While many analysts are warning investors to shun gold, there are actually a number of catalysts that point to a sustained rebound in the price of gold.
Central Banks Losing Control of Economy
Currently trading near $1,190, gold prices are down roughly 30% since the beginning of 2013 and flat year-to-date. Going forward, many believe gold prices will fetch just $1,050 per ounce at the end of 2015. It gets worse.
French bank and London bullion market maker Societe Generale said gold prices will average just $862.00 between 2016 and 2019. The group maintains that gold prices will plummet against a strong U.S. dollar. (Source: marketwatch.com, last accessed April 24, 2015.)
I think gold prices could surprise investors to the upside in 2015. Two of the most obvious factors that will impact gold prices are central banks and their monetary policies, and the state of the global economy.
First, central banks around the world have been and are currently involved in unprecedented monetary policies. Faced with economic stagnation and the threat of deflation, central banks have followed the quantitative easing (QE) trail, blazed by Japan and the U.S., slashing interest rates.
The U.S. Federal Reserve just ended its generous $3.5 trillion QE policy late last year. On top of that, central banks around the world have ramped up their own QE efforts; artificially lowering interest rates. In 2015 alone, over 20 major central banks around the world have enacted reckless monetary policies.
Sweden slashed its rates into negative territory; Canada’s interest rate dropped to 0.75%; Switzerland and Denmark have cut their deposit rates to rein in their currencies and tackle deflation. China, India, Japan, and the European Central Bank (ECB) have followed the same path.
Unfortunately, there are only so many strings the central banks can manipulate to keep the economic puppet show in the spotlight. A weak global economic outlook coupled with tightening from some of the world’s largest economies is stoking fears that central banks have lost their grip on the global economy.
If the current global monetary policies continue unabated, economic challenges, including capital misallocation, are going to get even bigger. The economy may end up being on the losing end of the stick, but one of the biggest winners will be precious metals like gold and silver.
Top 3 Gold Penny Stocks for 2015
Lake Shore Gold Corp. (NYSE/LSG)
As the name suggests, Lake Shore Gold Corp. is a gold mining company that is engaged in the acquisition, exploration, and development of three wholly owned, multi-million-ounce gold complexes in Canada. It also explores for silver ore. (Source: Lake Shore Gold Corp., last accessed April 24, 2015.)
In addition to its current operations, the company also has a number of highly prospective projects and exploration targets to drive its future growth—all located in and around the Timmins Camp.
On April 13, 2015, the company announced preliminary cash operating cost and all-in sustaining cost per ounce sold for the first quarter of 2015. Cash operating cost per ounce sold for the first quarter is estimated at US$509.00, an 18% improvement from US$623.00 per ounce in the first quarter of 2014, and significantly better than the company’s full-year 2015 target range of US$650.00 to US$700.00 per ounce. (Source: Lake Shore Gold Corp., April 13, 2015.)
All-in sustaining costs per ounce sold in the first quarter of 2015 are estimated at $748.00 per ounce, an improvement of 22% from $960.00 in the first quarter of 2014 and well below the full-year 2015 target range of $950.00 to $1,000 per ounce.
Total production costs in the first quarter of 2015 are estimated at approximately $33.0 million compared to total production costs of $29.7 million in the first quarter of 2014 and a full-year 2015 target of $125.0 million.
B2Gold Corp. (NYSE/BTG)
Based in Vancouver, British Columbia, B2Gold Corp. has four operating mines (two in Nicaragua, one in the Philippines, and one in Namibia) and a strong portfolio of development and exploration assets in Nicaragua, Mali, Burkina Faso, and Colombia. (Source: B2Gold Corp., last accessed April 24, 2015.)
On April 15, B2Gold Corp. announced its gold production and revenue for the first quarter of 2015. All dollar figures are in U.S. dollars unless otherwise indicated. Consolidated first-quarter gold production hit a record 1115,859 ounces, exceeding budget by 754 ounces and 20% greater than the first quarter of 2014. (Source: B2Gold Corp., April 15, 2015.)
The increased gold production was primarily attributable to the successful production start at Otjikoto. On February 28, 2015, the new Otjikoto Mine in Namibia achieved commercial production, one month ahead of schedule.
B2Gold is projecting another record year for gold production in 2015. Company-wide production in 2015 is expected to be in the range of 500,000 to 540,000 ounces of gold, a 35% increase over 2014 production.
Consolidated cash operating costs are expected to be in the range of $630.00 to $660.00 per ounce, compared to $680.00 per ounce in 2014.
Sibanye Gold Limited (NYSE/SBGL)
Sibanye Gold Limited is the largest individual producer of gold from South Africa and is among the world’s 10 largest gold producers. The company owns and operates four underground and surface gold operations. In addition to its mining activities, the group owns and manages significant extraction and processing facilities at its operations, which benefits the gold-bearing ore mined. (Source: Sibanye Gold Ltd., last accessed April 24, 2015.)
In late January, Sibanye reported record production of 14,079 kg (452,700 oz) for the quarter ended December 31, 2014. Total cash cost and all-in cost for the quarter will be approximately R285,000/kg (US$790.00/oz) and R375,000/kg (US$1,040/oz). (Source: Sibanye Gold Ltd., January 27, 2015.)
Gold production for the year ended December 31, 2014 was in line with guidance at 49,432 kg (1.59 oz).
Total cash cost for fiscal 2014 was approximately R295,000/kg (US$850.00/oz) and an all-in cost of approximately R376,000/kg (US$1,080/oz); in line with previous guidance. Capital expenditure of R3.3 billion (US$300 million) was marginally lower than guidance.
Gold production guidance for the year ending December 31, 2015 is forecast to be between 50,000 kg and 52,000 kg (1.61million oz and 1.67 million oz, respectively). Total cash cost is forecast at between R305,000/kg (US$850.00/oz) and R315,000/kg (US$875.00/oz). All-in sustaining cost is forecast to be between R380,000/kg (US$1,055/oz) and R395,000/kg (US$1,100/oz), with all-in cost forecast to be between R385,000/kg (US$1,070/oz) and R400,000/kg (US$1,110/oz).