Now is the time to look at gold miners again; BANG stocks over FANG stocks - Felder Report
(Kitco News) - In a world awash withovervalued equity markets, one market strategist once again has his eyes on themining sector as it continues to be ignored by generalist investors.
In his latest market report,Jesse Felder, creator of the Felder report and former Bear Sterns analyst, saidthat pervasive pessimism in the precious metal market has once again made themining sector relatively cheap.
Felder had the same call in2018 when he started recommending investors look at what he called the BANGstocks: Barrick (NYSE: Gold), Agnico Eagle (NYSE: AEM, TSX: AEM),Newmont/Goldcorp (NYSE: NEM) over FANG stocks: Facebook (Nasdaq: FB), Amazon (Nasdaq: AMZN), Netflix (Nasdaq: NFLX, Google (Nasdaq: GOOGL).
From his initial call, in May2018, the VanEck Gold Miners ETF (NYSEArca: GDX), which represents senior goldproducers, has risen 44%. The miner ETF peaked in July 2020, which representeda gain of nearly 90%.
Now Felder said that he seesthe same conditions from three years ago. Despite record margins, increasedcash flow and improved balance sheets, the mining sector has seen lacklusterinterest as gold prices remain trapped in consolidation.
Felder described the miner'scurrent performance as "absolutely pathetic compared to the S&P 500."
"Part of this is due to thestellar performance of the broad stock market, led by the likes of FANG, butthis gap could be closed by an equity bear market (driven by an earnings recessionnext year)," he said in the report.
Felder added that he isbullish on gold equities as he expects gold prices to pick up eventually.
"If you believe, as I do,that gold prices are only in the middle of a new longer-term bull market (asthe history of prior bull markets for the precious metal would suggest), thengold miner shares are just far too cheap at today's prices," he said.
Gold prices have struggled toattract new momentum and have not held sustainable gains above $1,800 an ounce.December gold futures last traded at $1,7845 an ounce, unchanged on the day.
In May, Felder noted thatgold was undervalued as investors ignored the rising inflation threat.
Analysts have said that goldis facing some significant headwinds as the Federal Reserve prepares to tightenits monetary policy, starting by reducing its monthly bond purchase before theend of the year.
Expectations of tightermonetary policy have pushed the U.S. dollar to near a one-year high. At thesame time, yields for U.S. 10-year notes have more than doubled from last year,currently trading around 1.68%.
By Neils ChristensenFor Kitco News
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