Proactive Investors - The gold price is soaring, currently sitting just shy of A$3,500.
While every company from small-cap to billion-dollar entities are getting excited, analysts at Citi say Newmont Corporation (NYSE:NEM, TSX:NGT, ASX:NEM, ETR:NMM) is the go-to stock.
Analysts have initiated coverage on the stock and while Newmont has experienced a run of poor trading recently, they believe the gold price will provide major tailwinds.
Citi is forecasting a share price of A$69 – around 20% higher than where the stock has been trading recently.
Citi is not alone in keeping its eye on the New York-listed mining giant, which merged with local hero Newcrest last year and maintained a secondary listing on the ASX.
Barrenjoey and Macquarie have also initiated coverage and are also bullish.
Citi told investors recently, “The stock has hugely underperformed gold”.
Analysts said it expected elevated gold prices to begin showing up in the company’s free cash flow going forward.
This will be a relief to investors, with shares down more than 6% since the start of the year, having bottomed at around A$45 in late February as the company was about to be ejected from the S&P/ASX 20 index.
Citi analysts believe that if Newmont can meet its production guidance and grow free-cash-flow per share, it will outperform the jump in gold prices.
Gold prices to remain high
Spot gold prices hit a record high above US$2,300 per ounce on Thursday, with Citi saying it is likely to stay around that mark for at least six months.
“Citi sees the market supported prices well-above US$1,925 per ounce and in a bullish wildcard scenario, would call for US$3,000-per-ounce gold price in a 12-month context.”
Analysts say one factor pushing up the price is the likelihood that the US Federal Reserve would cut rates.
Newmont is currently trading on the ASX at $57.32.