Gold (GCZ24) has always been a beacon of stability in uncertain times, offering a hedge against inflation, geopolitical turmoil, and currency fluctuations. Its enduring allure lies in its ability to preserve wealth when markets waver, making it a go-to asset for both seasoned investors and cautious newcomers. In fact, leading investment bank Goldman Sachs has recently turned heads with its forecast for gold prices to soar to $3,000 per ounce by the end of 2025.
Urging investors to “go for gold,” the bank’s optimism is rooted in soaring central bank purchases, strong demand for gold-backed ETFs this year, and geopolitical uncertainties fueling a shift toward safe-haven assets. On the flip side, recent market dynamics, including Donald Trump’s return to the White House, have temporarily weighed on gold prices. Investors, anticipating a stronger dollar and pro-growth policies under Trump’s leadership, have shifted away from gold, resulting in notable outflows from major gold ETFs.
But Goldman Sachs views this pullback as a short-term dip, with gold’s long-term outlook remaining bullish due to structural demand drivers and expected rate cuts. That said, this temporary pullback presents a compelling opportunity for investors to consider “Strong Buy”-rated gold stocks like Agnico Eagle Mines Limited (AEM) and Alamos Gold Inc. (AGI). While these names have seen declines post-election, mirroring broader industry trends, with Goldman and other brokers still confidently projecting a gold rally in the upcoming year, these stocks could offer significant upside potential.
For those ready to seize the moment, buying the dip in these two gold stocks could prove to be a smart bet now.
Gold Stock #1: Agnico Eagle Mines
Canada-based Agnico Eagle Mines Limited (AEM) stands as the world’s third-largest gold producer, operating across Canada, Australia, Finland, and Mexico. The company boasts a robust pipeline of exploration and development projects in these regions and the United States. Renowned for its exceptional environmental, social, and governance (ESG) practices, Agnico Eagle is a trusted industry partner.
Valued at $42.3 billion by market cap, shares of this gold miner have delivered stunning gains of 64.3% over the past year and 49.2% on a YTD basis, easily dwarfing the broader S&P 500 Index’s ($SPX) 31.7% annual return and 25.9% YTD gains. Zooming in further, the stock has also outshined the iShares Global Gold Miners ETF’s (RING) 32.6% gains over the past year and 23.4% return on a YTD basis.
Since its founding in 1957, the company has delivered consistent value to shareholders, maintaining an unbroken streak of annual dividends since 1983. During Q3, the company declared a quarterly dividend of $0.40 per share, set to be distributed to its shareholders on Dec. 16. Agnico Eagle’s annualized dividend of $1.60 per share offers a solid 1.90% yield.
Plus, the company maintains a healthy payout ratio of 45.24%, striking a balance between delivering value to shareholders and fueling its growth. Apart from dividends, during Q3, the company made a strategic move by investing $30 million in share buybacks, highlighting its dedication to boosting shareholder value.
The gold miner released its Q3 earnings report on Oct. 30, which blew past Wall Street’s top- and bottom-line estimates. Total revenue surged to $2.2 billion, marking a notable 31.2% year-over-year growth and edging out analysts’ forecast of $2.1 billion. Even more impressive was the company’s adjusted earnings, which skyrocketed 159% annually to $1.14 per share, outpacing expectations by a solid 16.3%.
Agnico Eagle reported gold production of 863,445 ounces in Q3 2024, up from 850,429 ounces last year, fueled by standout performances at the Nunavut operations, Macassa and Detour Lake. This growth more than offset lower outputs from Canadian Malartic and La India. The company strengthened its cash reserves by $55.2 million in Q3, led by higher revenues from robust gold prices and favorable shifts in working capital.
This boost in liquidity came despite increased capital expenditures and strategic investments, alongside significant financing activities, including a $375 million debt repayment. As of Sept. 30, the company reduced its total long-term debt to approximately $1.5 billion, marking a substantial $374.5 million decline from the previous quarter.
For fiscal 2024, management anticipates gold production to range between 3,350,000 ounces and 3,550,000 ounces, while capital expenditure for the entire year is forecast to land between $1.6 billion and $1.7 billion. Analysts tracking Agnico Eagle project the company’s earnings to soar 81.6% year over year to $4.05 per share in fiscal 2024 before growing another 14.6% to $4.64 per share in fiscal 2025.
Overall, Wall Street is bullish about AEM stock, with a consensus “Strong Buy” rating. Of the 14 analysts offering recommendations, 10 advise a “Strong Buy,” three maintain a “Moderate Buy,” and one suggests a “Hold.”
The average analyst price target of $92.05 indicates a 12% potential upside from the current price levels, while the Street-high price target of $105 suggests that AEM could rally as much as 27.8% from here.
Gold Stock #2: Alamos Gold
Canada-based Alamos Gold Inc. (AGI) shines with diversified operations across North America. Its portfolio includes the Young-Davidson Mine and Island Gold District in Ontario, Canada, and the Mulatos District in Sonora, Mexico. Alamos is driving growth with transformative projects like the Phase 3+ Expansion at Island Gold and the Lynn Lake project in Manitoba. With over 2,400 employees and a steadfast commitment to sustainable development, Alamos continues to set industry benchmarks.
With a market cap of around $7.9 billion, shares of Alamos have outperformed the broader market, posting gains of roughly 32.6% over the past year and 34.8% on a YTD basis.
On Nov. 21, the company announced a quarterly dividend of $0.025 per share, payable on Dec. 19. Its annualized dividend of $0.10 per share offers a modest 0.53% yield. For 15 consecutive years, the company has upheld its commitment to shareholder returns through consistent dividend payments. In 2024 alone, it has already distributed an impressive $41 million to shareholders.
On Nov. 6, Alamos Gold unveiled its Q3 earnings results, with operating revenue surging 40.9% year over year to $360.9 million, fueled by higher gold prices and increased sales volumes. This impressive revenue beat analysts’ expectations by a narrow margin. However, while adjusted EPS of $0.19 rose 35.7% annually, the bottom line fell short of Wall Street’s forecasts.
Alamos Gold achieved a record-breaking quarter, producing 152,000 ounces of gold, a 12% increase from last year and in line with management’s guidance. This stellar performance was driven by the successful integration of the newly acquired Magino mine, coupled with continued strength from the Island Gold mine and the Mulatos District, showcasing the company's operational excellence and growth momentum.
As of Sept. 30, Alamos Gold held $291.6 million in cash and cash equivalents, bolstered by a $250 million withdrawal from its credit facility, which was used to retire inherited debt from Argonaut, including a credit facility, term loan, and gold prepay. Furthermore, Alamos remained in a strong financial position, with a robust $542 million in total liquidity, ensuring it is well-equipped to fund future growth initiatives.
Looking ahead to fiscal 2024, management raised its gold production guidance to a range of 550,000 ounces to 590,000 ounces, marking a 13% boost from the original outlook. This upgrade reflects the successful addition of the Magino mine from July onwards and increased expectations for the Mulatos District, highlighting the company’s expanding operational strength. Additionally, total capital expenditures for the entire year are anticipated to range between $398 million and $443 million.
Analysts tracking Alamos Gold expect the company’s earnings to climb 43.4% year over year to $0.76 per share in fiscal 2024 and rise another 42.1% to $1.08 per share in fiscal 2025.
Wall Street appears highly optimistic about AGI stock, with a consensus “Strong Buy” rating overall. Of the 10 analysts offering recommendations, eight advise a “Strong Buy,” one maintains a “Moderate Buy,” and one suggests a “Hold.”
The average analyst price target of $23.34 indicates a 28.2% potential upside from the current price levels, while the Street-high price target of $28 suggests that AGI could rally as much as 53.8% from here.
