The average gold price forecast for 2011 is $1,457. This figure represents the average price prediction of a large group of high profile analysts posted by the London Bullion Market Association. The average high range they see is around $1,633 giving the price some upside potential. Over the past 10 years the average gold price has generally exceeded analyst expectations.
Which gold stocks are positioned well for another upswing in gold prices?
- To scan for such stocks we will first eliminate any stock mid-cap and above. Larger gold producing firms (such as Goldcorp Inc. (NYSE:GG), which has a market cap of 32.79 billion, are often under more pressure to find new gold-bearing property and expand their resources, and this can weigh heavily on valuations.
- Next, we look for average volume over 100K to give us at least some liquidity.
- Third, we focus on price performance with moderate increases over the quarter and month.
The screening criteria are not overly rigid as many of the smaller gold stocks are not listed on the bigger exchanges. Therefore, we will keep the criteria loose. (You might also be interested in What is the Fundamental Upside for Silver in 2011?)
Small Gold Stocks on the Climb
- (MGH) – Minco Gold Corporation
- (KBX) – Kimber Resources
- (NYSEMKT:CGR) – Claude Resources, Inc.
- (OTC:CGC) – Capital Gold Corp.
- (NYSEMKT:MDW) – Midway Gold Corp.
- (NYSEMKT:EGI) – Entrée Gold inc.
- (NYSEMKT:NAK) – Northern Dynasty Minerals Ltd.
- (GRS) – Gammon Gold, Inc.
Ignoring Financial Ratios
We will not focus heavily on the financial ratios as smaller speculative gold companies cannot be compared with big blue chip stocks with valuation metrics. We are expecting a big momentum push based on gold prices jumping and not some 'free cash flow' formula.
Still, next year CGR expects 180% EPS increase, GRS 100%, and NAK 80%. Based on this, the 96 trailing PE of CGR should come into a better range with a forward PE of 18. But again, we are not focusing heavily on value with these gold picks.
Of interest, 6 of the 8 stocks are from Canada.
Momentum and Price Action
Almost all of the stocks have already doubled in value when comparing their lows to highs over the past 7 months.
CGR has made a small pullback in Feb while GRS has made a late Feb breakout into the $9 range. NAK sharply retreated and is gearing up for another run at the 21.50 range. CGC is slowly trending upwards in a channel that is narrowing with smallish volume, and EGI is making another attempt to hit the highs around $3.40. KBX wants to see if it can break $160 resistance, MGH is consolidating, while MDW has doubled over the past two months on really big volume.
Are you bullish on this yellow precious metal and have some other favorite picks on major exchanges if the gold price forecasts for 2011 hit the top end of the range? I’d like to hear them.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.