Start the conversation
Today, we're giving you the two best gold mining stocks to buy in 2017. These two will be great long-term investments because we expect gold prices to rise 12.2% from their current $1,248 price to $1,400 by the end of the year.
Here are the two reasons why Money Morning Resource Specialist Peter Krauth sees the price of gold reaching that target in 2017...
Why Gold Prices and Gold Mining Stocks Could Surge in 2017
Krauth is bullish on the gold market this year for two primary reasons...
The first reason is climbing inflation. The inflation rate right now is 2.7%, which is the highest it's been since 2012. As the stock market continues to reach new heights and the yields on 10-year Treasury bonds continue to rise, inflation is only going to get worse.
The relationship between a rising market and inflation is usually an inverse one. That means a rallying stock market will push down the U.S. dollar's purchasing power, which raises prices on goods and serves as a bad economic signal.
Yields on 10-year Treasury bonds are on the rise, which is another inflation sign. Over the last month, yields have increased from 2.31% to 2.42%. The yield even hit a two-and-a-half-year high of 2.62% on March 13.
We rely on the U.S. Federal Reserve to track inflation and put controls in place to keep our economy from overheating. One of the ways the Fed does this is by adjusting interest rates. It has hiked rates twice in the last six months - first in December 2016 and second on Wednesday, March 15. Rates currently stand in the 0.75% to 1% range, and Fed Chair Janet Yellen said there could be two more rate hikes this year.
When the economic outlook is uncertain, the demand for gold goes up. This is great news for the price of gold, which also means it's great news for gold stocks.
The second reason Krauth expects a gold price rally in 2017 is a reported drop in the number of short bets on gold stocks. Investors "short" a stock or commodity when they think the price is going to drop. When the price goes down with a short position, the investor makes money.
So far in 2017, one of the biggest indexes that tracks gold shorts - the Gold Bugs Short Index - is down 11%. And the weekly CFTC Commitments of Traders report said total short positions on gold futures contracts fell 2.1% from Feb. 28 to March 7. This means that investors aren't betting against the precious metal, which is a good sign for long-term gold prices.
That's why Krauth expects the gold price to head 12.2% higher to $1,400 per ounce. Both analysts from Dutch bank ABN AMRO and UBS Group AG (NYSE: UBS) agree with this prediction.
And the gold mining sector will see big profit growth as gold prices increase. After all, a higher gold price means more money made on each ounce mined and sold.
The two gold mining stocks we're recommending today are among the most dominant producers in the sector. One of them is the largest gold producer in the world, while the other has extremely low operating costs, allowing it to rake in more profit on each ounce sold.
Here are two of the best gold stocks to buy this year...