Safe Havens Back in Demand, Look at 10 ASX Gold Stocks

Small gold nuggets in an antique measuring

Safe-havens such as gold, Japanese Yen, and Government bonds have shown promising recovery under the current global scenario, market players are flocking to safe-heavens to hedge against the event risks.

Safe-Havens Return Profile:

Gold prices improved significantly from its May’s low of US$1266.35 (closing US$1305.51) to the current high of US$1393.27 (Day’s high on 20th June 2019), which in turn, marks a return of more than 10 per cent in about 6 weeks from the May’s low to June’s High, including the non-trading days.

Most of the value addition in gold prices have been seen in the current month, with gold reaching from its May’s close of US$1305.51 to the level of US$1393.27, which in turn, translating to a gain of more than 7 per cent in just 13-days, including non-trading days.

The value addition in the yellow-metal price was mainly due to the prevailing U.S-China trade war, and the United States increased stance to raise the tariff to address most of its issue. Post-China, the United States brought Mexico and India under the tariff radar.

While Mexico skipped the tariff as they improved the regulations and curbed the illegal immigrants’ issue, India retaliated with a tariff hike following China’s stance. The tariff hike created a looming condition for the global economy, which, in turn, pulled the value and demand of safe-havens.

Australian Gold:

The gold rush in the international market witnessed an uprise for the Australian Gold Spot. The XAU/AUD inched up from its April’s low of A$1768.51 (A$1820.96 closing) to the present month high of A$2005.86 (Day’s high of 20th June 2019, AEST: 12:30 PM).

The Australian gold delivered a return of 13.40 per cent from its April’s low to the current month’s high, and a return of more than 6.6 per cent from its May’s closing of A$1881.20.

The Australian gold outperformed the dollar-denominated gold spot, as, the Australian gold spot leveraged the U.S-dollar, and the domestic currency (AUD) depreciated over time amid various factor such as looming domestic economy, 25bps rate cut from RBA, etc.

Bond Market:

Bonds, which are regarded as another safe-heaven, marked a substantial gain in value over time. The market discount rate or the bond-yield-to-maturity on a 10-year exchange-traded treasury bond in Australia declined from the level 2.828 per cent (high in November 2018) to the present level of 1.341 per cent (as on 20th June 2019, AEST: 12:57 PM).

The bond value bid and ask rate is above the face value of 100.

On the other hand, the market discount or the bond-yield-to-maturity on the United States 10-year bond declined from the level of 3.261 per cent (high in November 2018) to the present low of 1.975 per cent (as on 20th June 2019 12:57 PM AEST).

The decline in the market discount rate inched up the bond prices and bonds delivered good returns in the environment of global looming conditions.

Japanese Yen:

The Japanese Yen is regarded as a safe-heaven of the currency market, as the economic conditions of Japan remains comparatively stable as compared to other nations.

JPYUSD:

The Japanese Yen inched up from the level of US$0.00895 (low in May 2019) to the current high of US$0.00930 (Day’s high on 20th June 2019). The appreciation in the Japanese Yen denotes a return of 3.9 per cent.

From the above metrics it can be seen that the above-mentioned safe heavens delivered moderate return, which could be justified by the fact that the risk-free assets do not include the additional risk premium carried out by the risky assets.

Despite a rise in value over a short-span the investors should remain cautious, as the safe-heavens are susceptible to the FED’s less dovish stance than the market expectation.

In the recent status quo, the FED indicated towards a possible rate cut, which in turn, pulled the safe-heavens up; however, if FED turns out to be less dovish than it sounded the safe-heavens would be the first to fell the pressure, which in turn, makes them vulnerable to the upcoming FED decision.

FED Over Trade Optimism:

Presently, the trade disagreement between the United States and China has seen no damaging outcome post the previous tariff hike, and the United States let away the Mexico tariff deadline without pushing up the taxes, which in turn, could nudge FED to reassess the global risk and the impact of the trade disputes.

Post considering the risk-free assets (nominal risky assets) let us now have a look over stocks, which are linked to the gold prices to generate returns, dividend and revenue growth.

Gold Stocks:

Evolution Mining Limited (ASX: EVN)

EVN growth story begins with the fact that the company is constantly pulling up its gross profits and total revenue from the financial year 2015, and the dividends are also increasing.

Revenue Growth:

Dividend Growth:

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Northern Star Resources Limited (ASX: NST)

NST has shown steady revenue growth with a three-year CAGR of 10 per cent. The dividend growth story of the company is also stable with a three-year CAGR of 167 per cent.

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Dividend Growth:

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 Saracen Mineral Holdings Limited (ASX: SAR)

SAR revenue growth is strong, with a 3 year revenue CAGR of 27%.

Revenue Growth:

Dividend Growth:

The company has not provided any dividend since 2015.

Stock Monthly Return:

St Barbara Limited (ASX: SBM)

Revenue growth of the company is steady.

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Resolute Mining Limited (ASX: RSG)

RSG revenue shot-up in FY2018; however, investors should further investigate the reasons as a single metric can’t measure the overall performance.

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Dividend Growth:

Stock Monthly Return:

Regis Resources Limited (ASX: RRL)

RRL revenue growth is stable with a CAGR of 9 per cent. The dividend growth is good with a three-year CAGR of 39 per cent.

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Dividend Growth:

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Newcrest Mining Limited (ASX: NCM)

NCM growth story lags with a decline in revenue and dividend also witnessed a steep decline.

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Dividend Growth:

 

Stock Monthly Return

Ramelius Resources Limited (ASX: RMS)

RMS revenue has witnessed good growth over the years. However, the company distributed no divided over last three years, it delivered a compounded growth of 38 per cent in revenues in the last three years.

Revenue Growth:

 

Dividend Growth:

The company has not provided dividend since 2015.

Stock Monthly Return

  

Tribune Resources Limited (ASX: TBR)

TBR revenue growth is steady with a 27 per cent CAGR; however, the company distributed no dividend.

 Revenue Growth:

Dividend Growth:

The company has not provided dividend since 2015.

Stock Monthly Return

West African Resources Limited (ASX: WAF)

WAF is relatively new in the gold block, the sharp upside and decline in the percentage change of the revenue could be justified by the fact that the company is in a growth phase.

Revenue Growth:

Dividend Growth:

The company has not provided dividend so far.

Stock Monthly Return


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