Gold Stock Has Room to Run

GFI options are attractively priced at the moment

Managing Editor
May 5, 2020 at 2:27 PM
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Gold prices have been on investor's radar all year, amid the broad market crash and subsequent rapid recovery. Through it all, mining stocks such as Gold Fields Limited (NYSE:GFI) have come out relatively unscathed, to the tune of a 107% 12-month gain. As if that's not enough, data from Schaeffer's Senior Quantitative Analyst Rocky White suggests GFI is flashing a buy signal that indicates more tailwinds ahead for the red-hot gold stock.

Daily Stock Chart GFI

In fact, Gold Fields stock's recent high comes amid historically low implied volatility (IV) -- a combination that has been bullish for the stock in the past. According to White's modeling, there have been three other instances in the past five years when the stock was trading within 2% of its 52-week high, while its Schaeffer's Volatility Index (SVI) sat in the 20th annual percentile or lower -- as is the case with GFI's current SVI of 88%, which sits in the 16th percentile of its 12-month range.

The data shows that one month after two of those three previous signals, the mining stock was up 7.6%. From its current perch at $7.71, another move of that magnitude would put the stock around $8.30, a chip-shot from its April 23 seven-year high of $8.48. 

Despite the security's recent outperformance, analysts remain skeptical. The majority of of analysts in coverage rate GFI a tepid "hold," while the consensus 12-month price target of $8.40 is a slim 8% from its current perch. 

 

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