ASX gold stocks have lost their shine but this is the time to be snapping up bargains in the sector as the gold price is tipped to hit new highs.
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ASX gold stocks have lost their shine with investors but this is the time to be snapping up bargains in the sector.
That’s the view of Goldman Sachs who believe these stocks have been oversold despite today’s bounce.
While many ASX gold miners are outpacing the 1.1% jump in the S&P/ASX 200 Index (Index:^AXJO) this afternoon, most are still scrapping the bottom of their six-month trading range.
Why ASX gold stocks have lost their lustre
The bounce back in global economic growth and the start of mass COVID-19 vaccinations in countries like the UK and US have prompted investors to dump safe haven assets for cyclical stocks
This explains why the gold price has been falling over the past few months after hitting a record high of over US2,000 an ounce.
But Goldman Sachs doesn’t think the dip will last. If anything, the broker expects the gold price to shoot towards US$2,300 an ounce as early as this quarter!
New record gold prices for 2021
This is where the gold price is forecast to average for the entire 2021 calendar year. The gold price is currently trading around US$1,825 an ounce, suggesting there is significant upside if Goldman is right.
However, the broker believes the best bang for your investment dollar won’t be with the gold sector leaders. These heavyweights include the Newcrest Mining Ltd (ASX: NCM) share price and Evolution Mining Ltd (ASX: EVN) share price.
“Looking out to 2021, we think companies that can demonstrate production growth and advancing project pipelines in a supportive pricing environment will benefit,” said Goldman.
“We continue to view brownfields production and reserve growth as the clearest opportunity for value creation particularly in the mid-cap space.”
The best ASX gold stock to buy now
The ASX mid-cap gold stock that stands out is the St Barbara Ltd (ASX: SBM) share price. The stock is on Goldman’s “conviction buy” list as it’s trading at a wide discount. The SBM share price stands at around 0.52 times net asset value, or a 39% discount to the sector.
What’s more, the broker believes St Barbara will increase gold production by 36% by FY25 thanks to its brownfield projects.
Other ASX gold shares to buy
Another mid-tier gold producer on Goldman’s list of ASX stocks to buy is the Resolute Mining Limited (ASX: RSG) share price.
Resolute has the best free cashflow (FCF) generation potential among all the gold stocks under Goldman’s coverage. It’s expected FCF yield is 39% for this calendar year and there’s cost and production upside from its various projects.
The third emerging ASX gold stock to watch is the OceanaGold Corp (ASX: OGC) share price. Goldman is urging investors to buy the OGC share price as it’s trading at around a 33% discount to the sector.
The stock is also trading on a decent FCF yield of 11% in 2021 despite having to invest in Waihi and Haile underground projects.
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The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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