Hedge fund managers say buying these 3 stocks could play into red-hot gold prices | Wilnesh News
Gold is flying now. Precious metal prices surged to record highs on expectations of rate cuts and geopolitical tensions over the ongoing war in Ukraine and Gaza. Gold prices surged to $2,222.39 an ounce on Thursday, hitting a record high after the Federal Reserve kept interest rates on hold and forecast three rate cuts this year. The asset has since given back gains to around $2,208 when it last traded. Analysts expect gold prices to have more room to rise. It is widely believed that when interest rates fall, gold prices tend to rise and bonds become less attractive because they no longer offer attractive yields. Top hedge fund manager David Neuhauser predicts gold prices will reach $2,500 by the end of 2025 and $3,000 by 2030. “Yields are starting to come back down and the S&P (500) is near all-time highs. And underneath the surface, the Fed is probably going to cut interest rates at some point this year,” Neuhauser told CNBC Pro this week. In his latest comments to CNBC Pro after the Fed’s decision, he said: “The Fed continues to reflect today that three rate cuts are on the way, and with that, gold has now hit an all-time high as expected. The U.S. dollar is Weakening, so commodities should break out and become the best asset class soon given rising inflation.” A weaker dollar tends to push gold prices higher as people have more purchasing power to buy more of the precious metal. Neuhauser, founder and chief investment officer of Livermore Partners, added that there is another reason to invest in gold. “The other aspect where I think gold is worth investing in is when you look at the huge deficits that are building in the U.S. and above, and they’re talking about how many trillions of dollars of debt we have, I mean, this is going to continue to go higher and then We have elections later this year,” Neuhauser added. He said that no matter who is elected in the US presidential election, there will still be a lot of pressure to continue to stimulate the economy. He noted that there would be “massive” fiscal spending under President Joe Biden’s plan. This means debt is unlikely to fall. At some point, the dollar will come under pressure, he said. When a government accumulates more debt, it may print more money or increase spending, which may push inflation higher — in which case investors may turn to gold as a hedge against rising prices. Want to choose stocks and play gold themes through gold miners? Neuhauser said that even in this environment, not all gold stocks are created equal – some large miners have underperformed despite record gold prices. Examples he cited include Newmont Gold Corp. and Barrick Gold Corp., which he said have high costs or “difficult locations.” Neuhauser said what matters to gold miners is their location, as geopolitical risk is a factor. He would choose miners located in OECD countries that have “good government relations,” don’t have “crazy royalty rates,” are safe jurisdictions, and have good management teams. They should also generate good free cash flow and be able to pay dividends. One stock Neuhauser likes is Canadian-listed Amaroq Minerals. “Amaroq is a great ‘pure play’ mining company, coming on stream in 2024, with high-grade, low-cost mines and huge opportunities in copper and nickel, and located in an OECD country. The last frontier, they have the best Permit,” he said. Neuhauser also singled out U.S.-listed Coeur Mining, which owns mostly U.S. gold and silver assets, saying the company has underperformed over the years. “We think now is a time when the stock can potentially outperform over the next several years because they’re going to have free cash flow and for the first time, they can start paying dividends,” he said, naming his third The stock is Canadian-listed Wesdome Gold Mines, which he said meets his overall criteria for gold mining stocks. Commodities including gold and oil may currently account for 25% of investors’ portfolios, Neuhauser said. He admitted that this was higher than the “rule of thumb” of around 10%. “Because I do think you want to protect yourself from a weak dollar. You also want to protect yourself from inflation,” he said. “A lot of these companies are struggling to pay high yields.”
