Preston talks about the factors influencing the gold price and comments on a number of up-and-coming stocks she’s watching right now.
“We are positioned cyclically for a new gold bull market,” Resource Maven Gwen Preston told the Investing News Network via phone.
Preston expects the gold price to gain over the next 12 months on low to negative real interest rates, which are the “fundamental drivers of the gold price.”
She said expectations for near-term rate hikes in the US have dropped to “pretty much zero” despite several increases in the Federal Funds Rate over the past 12 months. She does not think the US Federal Reserve will be able to raise rates three times in 2018.
Preston added that gold’s fundamentals are very strong because there is “incredible uncertainty around the world, starting with [US President] Donald Trump and going to North Korea. Then continuing with all kinds of economic arguments about the strength of the US economy and the dollar.”
She also explained that US markets are “very highly valued” right now, though it is impossible to know when or if they will correct or crash.
For her part, Preston isn’t banking on a crash to propel investors into gold, but she believes a sharp contrast in risk and value between gold stocks and the broad market is becoming increasingly apparent. She sees those circumstances eventually luring generalist investors over.
“Gold stocks are ridiculously cheap right now compared to average equities, which are super overvalued,” she said.
She acknowledged the rise of cryptocurrencies as a safe-haven investment competitor to gold, but said gold “undeniably” holds more appeal because it is more established.
“We’re starting to see some cracks [in the cryptocurrency market] with China banning initial coin offerings, and some major banks in the states exiting cryptocurrencies because they see too much risk.”
Preston’s stock picks
In terms of gold, Preston recommends Red Eagle Mining (TSXV:R), which operates and controls Red Eagle Exploration (TSXV:XR). Red Eagle Exploration announced new high-grade gold-silver discoveries at its California project in Colombia on Tuesday (September 26).
She also likes Novo Resources (TSXV:NVO), which has made potentially “one of the biggest gold discoveries ever … in Western Australia.” Meanwhile, GT Gold’s (TSXV:GTT) Tatogga project is an example of a project that “doesn’t happen unless you’re in a bull market,” she said.
Copper is up 20 percent in 2017 and 38 percent in 12 months on supply tightness and increasing refining capacity in top-consumer China. Zinc, another base metal, is up 100 percent in 18 months, and Preston expects its gains to continue over the next year.
She thinks Pine Point Mining’s (TSXV:ZINC) lead-zinc project in Canada’s Northwest Territories “is an undervalued opportunity in the zinc space.”
“When you have copper doing well, zinc gaining and a bullish context for precious metals, that’s when the entire market can participate in creating momentum. I think that’s part of luring generalist investors over to the mining segment,” Preston commented.
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.