Wall Street Ups Its Expectations On These 2 Gold Stocks

Gold stocks Agnico Eagles Mines Ltd (USA) (AEM) and Barrick Gold Corporation (USA) (ABX) have more than doubled in 2016

Aug 8, 2016 at 10:53 AM
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Several gold stocks are on the receiving end of upbeat brokerage attention today, even as rate-hike expectations are rising following Friday's jobs report, pressuring the precious metal. Among the highest-profile of the bunch are Agnico Eagle Mines Ltd (USA) (NYSE:AEM) and Barrick Gold Corporation (USA) (NYSE:ABX). Below, we'll take a closer look at how AEM and ABX are responding to the analyst notes.

AEM saw mixed attention from RBC, which cut its rating to "sector perform" from "outperform," but lifted its price target to $67 from $65 -- territory not explored in nearly five years. Barclays chimed in, too, boosting its target price to $61 from $50. Out of the gate, the gold stock has edged up 0.3% at $58.12 -- and, year-to-date, it's gained upwards of 120%. Also, the August outperformer is just a chip-shot away from four-year highs.

Options traders have been anticipating extended upside for AEM in recent weeks, buying to open four times as many calls as puts across the major exchanges. The gold stock's corresponding 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 4.04 ranks in the bullishly skewed 71st percentile of its annual range. Plus, this morning, buy-to-open activity is detected at Agnico Eagle Mines Ltd's in-the-money September 55 call.

Meanwhile, fellow gold stock ABX is up 2.2% at $21.70, benefiting from a price-target hike to $22 from $14 at Barclays. Similarly, the company's Canadian-traded shares saw their target price boosted to C$34 from C$33 at Canaccord Genuity. This sunny-side-up approach is warranted by the stock's long-term technical strength, having nearly tripled in value this year.

A capitulation among bearish options holdouts could add fuel to the fire, too. Barrick Gold Corporation's Schaeffer's put/call open interest ratio (SOIR) stands at 1.11, with puts outstripping calls among strikes expiring in the next three months. What's more, this SOIR ranks in the put-skewed 85th percentile of its annual range.

As alluded to, gold has come under pressure lately amid rising rate-hike expectations, as higher interest rates increase the opportunity cost of holding the non-yielding metal, especially as the dollar strengthens. That said, precious metals remain far and away the best-performing sector over the past year.

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