Why the Worst May Not Be Over for These 3 Gold Stocks

Barrick Gold Corporation (USA) (NYSE:ABX), Yamana Gold Inc. (USA) (NYSE:AUY), and Eldorado Gold Corp (USA) (NYSE:EGO) all hit new multi-year lows earlier

Sep 4, 2015 at 11:16 AM
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Gold is headed for a second consecutive weekly loss, after this morning's mixed jobs report failed to give Wall Street any supporting evidence of a possible September rate hike (and, despite hawkish comments from one central bank bigwig). This negative price action has spread throughout the sector, with commodity stocks Barrick Gold Corporation (USA) (NYSE:ABX), Yamana Gold Inc. (USA) (NYSE:AUY), and Eldorado Gold Corp (USA) (NYSE:EGO) all tumbling to fresh lows in the wake of the data.

ABX, for example, tagged $6.23 earlier -- its lowest mark since October 1989 -- but was last seen down 3.4% at $6.26. Longer term, the shares have surrendered roughly two-thirds of their value over the past 52 weeks, and have encountered increased pressure from their 32-day moving average since mid-May.

Option traders have kept the faith, though. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Barrick Gold Corporation's 10-day call/put volume ratio of 19.77 ranks in the 96th annual percentile, meaning calls have been bought to open over puts at a near-annual-high clip. An unwinding of these bullish bets could pressure the shares even lower.

AUY, meanwhile, is down 2.1% at $1.67, and fresh off an 11-year low of $1.66. This is just more of the same for a stock that's down 58.5% year-to-date, and whose most recent rally attempt was swiftly rejected by its descending 10-week moving average.

There are pockets of optimism levied toward this chronic underperformer, as well, which could translate into additional headwinds down the road. Specifically, 60% of analysts maintain a "buy" or "strong buy" recommendation toward Yamana Gold Inc., while the average 12-month price target of $5.10 rests in territory not seen since last October. Simply stated, the door is wide open for a round of downgrades and/or price-target cuts.

EGO notched a new six-year low of $2.70 earlier, but was more recently trading 2% lower at $2.71. The stock has been struggling for some time, though, and is currently staring at a 55% year-to-date deficit. What's more, a mid-August rebound was contained by the equity's 80-day moving average -- a trendline that's ushered EGO lower for most of the year.

Short sellers have recently started upping the bearish ante on this broad-market laggard. Specifically, short interest jumped 16.4% in the last two reporting periods, but still only accounts for less than 1% of Eldorado Gold Corp's available float. The stock could face a fresh wave of selling pressure, should shorts continue to increase their exposure.

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