Gold Hits New High: 3 Stocks Investors Should Watch

July 18, 2024 at 07:00 AM EDT

coins and gold bars stock chart

Most investors will find the stock market to be a frustrating reflection of the economic realities of the United States, and that’s okay. The market will not always be in sync with the economy, but that’s where savvy investors will make most of their year’s gains, in closing the gap between what is happening under the hood and what the market says is happening.

While the lion’s share of market attention has landed many in the technology sector, particularly around stocks dealing in the growth and global adoption of artificial intelligence, other economic spaces warrant some attention today and in the coming quarters. To diversify portfolios away from the potential tops in NVIDIA Co. (NASDAQ: NVDA), investors need to look at the road ahead rather than try to monetize what’s in the rear-view mirror.

One of these sectors concerns gold mining stocks, considering that the precious metal just broke out to reach an all-time high, past a level not seen since the inflationary periods of the 1970s. Topping the list of potential winners in the VanEck Gold Miners ETF (NYSEARCA: GDX) are stocks like Osisko Gold Royalties (NYSE: OR), Triple Flag Precious Metals (NYSE: TFPM), and even Royal Gold Inc. (NASDAQ: RGLD).

Institutional Buying Drives Short Sellers Away from Osisko Stock

Knowing that inflation remains sticky in the United States and that CME’s FedWatch tool projects a 90% probability of an interest rate cut in September 2024, gold prices will likely keep their recent momentum higher.

So, the asset managers that created the VanEck Gold ETF decided to boost their allocations to Osisko stock by 3.7% in the past quarter, bringing the institution’s net investment in the stock to $345 million today. As a result, Osisko stock’s short interest collapsed by 16.8% in the past month alone, a show of capitulation from the bearish side of this stock.

Building on the evidence for a potential bullish run in Osisko stock, investors can look at recent price action over the past six months. A 28% rally sent Osisko stock over the 18.3% that the broader S&P 500 delivered over the same period.

Price momentum is likely to keep pushing short sellers away and potentially attract further institutional capital. This is why markets as a whole are also okay with paying a premium valuation for Osisko stock over the rest of the gold and silver industry.

On a price-to-sales (P/S) basis, Osisko stock trades at 18.3x to command a premium of 42.9% over the 12.8x average valuation multiple for the rest of the industry. Stocks typically trade at these sorts of premiums and near their 52-week highs for good reason, and investors now have the fundamental story on their side.

Wall Street Raises Price Targets for Triple Flag Precious Metals Stock

Analysts at Bank of America boosted their price targets on Triple Flag Precious Metals stock from $18 a share to $20, which calls for a 22% upside from where it trades today. The caveat is that these targets were updated in May 2024, so here’s a more recent view.

Those at Jefferies Financial Group also saw it fit to boost Triple Flag Precious Metals stock’s price target to $20 a share; only these targets came in more recently, as of July 2024, so investors can lean on the potential bullish case for this stock in the coming quarter.

Similarly to Osisko, short interest for Triple Flag Precious Metals plummeted by 11.3% over the past month, leaving room for the VanEck asset management group to boost its stakes by 0.9% in the past quarter, bringing its net investment to $51.4 million today.

In the market’s view, this stock also deserves a premium, starting with a price-to-earnings (P/E) ratio. Trading at 86.3x today will place Triple Flag Precious Metals at a premium of 211% above the gold and silver industry’s average of 27.7x P/E today.

Royal Gold Dominates Growth in the Precious Metals Industry

Among this group, Royal Gold attracted the best Wall Street analyst forecasts for earnings per share (EPS). For the next twelve months, the expectations lie at 26.5%, above the 10.4% forecast for Osisko and the 18% projections for Triple Flag Precious Metals stock.

Commanding the most EPS growth from analysts led others on Wall Street to boost their price targets on the stock. Those at CIBC now see a valuation for Royal Gold stock at $175 a share, daring it to rally by 25.7% from where it trades today.

Like others in this list, the market is willing to pay a premium for Royal Gold stock. On a P/E basis, this stock trades at 41.3x, roughly 49% above the industry’s 27.7x average valuation today. Following these trends, investors shouldn’t be surprised to see institutional buying.

VanEck also boosted its stake in Royal Gold stock by 6.8%, for a net $559.8 million total investment. Another player, the Vanguard Group, also came in, boosting its stakes by 0.3% over the past quarter to bring its position up to $811.9 million today.

Seeing Royal Gold stock’s short interest decline by 4.2% over the past month shouldn’t come as a surprise to investors after noticing all the momentum behind this stock. That is just the nature of gold mining companies today, particularly as gold prices see no obstacles in the coming quarters.

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Gold Hits New High: 3 Stocks Investors Should Watch

Institutional Buying Drives Short Sellers Away from Osisko Stock

Wall Street Raises Price Targets for Triple Flag Precious Metals Stock

Royal Gold Dominates Growth in the Precious Metals Industry

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