CHICAGO, Dec. 9, 2015 /PRNewswire/ -- Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today published its latest Basic Materials Observer, "Don't Sweat the Fed: Rate-Hike Worries Create a Golden Opportunity in Mining Stocks." In the report, Morningstar equity analysts explain their long-term forecast for gold prices, the effect of higher interest rates on near-term gold prices, their outlook for supply and demand, and their favorite picks among gold miners.
"During the next five years, there will be a profound shift in the nature of gold. It's transforming from not just a financial commodity, but to a consumer one. Over time, jewelry purchases of gold will overshadow the importance of gold buying by financial institutions, such as central banks and exchange-traded funds," Kristoffer Inton, equity analyst for Morningstar, said. "Despite worries about higher interest rates negatively affecting investor demand for gold, we think jewelry demand provides long-term support for gold prices and see an opportunity for investors to purchase gold mining stocks at a discount to their fair values."
Key findings of Morningstar's Basic Materials Observer report include:
- Barrick Gold, Eldorado Gold, and Goldcorp are the most attractively priced investment opportunities in the industry. Current equity market valuations appear to reflect expectations of gold prices below $1,000 over the long term, which is lower than Morningstar's forecast.
- Morningstar analysts forecast a gold price of $1,160 per ounce in current 2015 dollars, or $1,300 per ounce, unadjusted for inflation, by 2020. As of Dec. 8, 2015, gold was $1,074 per ounce.
- Gold prices will slip below $1,000 per ounce in 2016 because of higher U.S. interest rates and continuing deflation of mine operating costs. Analysts expect prices to recover in 2018 and 2019.
- During the next five years, Morningstar analysts forecast a 4.7 percent compound annual growth rate (CAGR) in total physical gold demand, led by Chinese and Indian jeweler purchases.
- Jewelry will account for two-thirds of gold demand by 2020, up from a 50 percent share in the last five years. The share of gold purchases from central banks and exchange-traded funds (ETFs) will decrease to less than 5 percent in the same time period.
- Global mine production would need to increase by approximately 5 percent, or 200 metric tons, in addition to projects already in development to meet expected demand by 2020.
An analyst note summarizing the findings is available here. The Morningstar Observer series is available to clients of Morningstar® Institutional Equity Research ServicesSM and in Morningstar DirectSM and Morningstar® Advisor WorkstationSM, the company's investment research and analysis platforms. More information about Morningstar's equity research is available at http://global.morningstar.com/EquityResearch.
Morningstar's Observer series features in-depth sector research reports that harness Morningstar's focus on a long-term investment horizon and economic moats—or sustainable competitive advantages—to analyze complex investment trends across sectors. The company publishes the Observer series regularly throughout the year, focusing on various topics across sectors, including basic materials, consumer, energy, financial services, healthcare, industrials, technology, and utilities.
Morningstar launched its equity research coverage in 1998 and has approximately 100 global equity analysts who provide qualitative analyst coverage of more than 1,400 companies.
About Morningstar, Inc. Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 17 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $170 billion in assets under advisement and management as of Sept. 30, 2015. The company has operations in 27 countries.
Securities identified above are provided for illustrative purposes and therefore do not constitute investment advice or an offer to buy or sell the securities. The opinions expressed above and in the Basic Materials Observer report are given in good faith, are as of the date of this release and report, and are subject to change.
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