NovaGold Resources Inc. (NYSE:NG) $NG The Ultimate Recession Hedge
Novagold is the best leveraged pure gold play
NovaGold Resources
Ticker: NYSE:NG
Price: $8.77
- Central banks around the world have been debasing currencies since the Great Recession.
- In this environment, there is a strong case to have a meaningful allocation to gold in your portfolio to hedge currency risk.
- Novagold has several fantastic qualities: size, grade, jurisdiction, and management.
- Novagold is the best leveraged pure gold play.
The price of Novagold stock is presently having a significant correction, down roughly 25% from its recent high. The popular gold mining ETF is down roughly 14% over a similar time frame. Some of the recent weakness in Novagold is thanks to a short seller report released on May 28th that highlighted the proposed gas pipeline cost as being underestimated. Novagold management was quick to handle it, and we don’t find merit in the short seller report.
Our sentiment is that the gold price will break through its previous high of $1,900 per ounce and continue into the mid $2000s. Then, the optionality would kick in, leading to a significantly higher net present value for the Donlin Gold project. Novagold offers us a unique opportunity versus other gold mining companies. It ought to provide an asymmetrical or non-linear relationship to the gold price. When gold trades higher than $2000 per ounce, the leverage of the project to higher gold prices will trounce the slightly higher cost to extract the commodity. We advise taking advantage of the recent weakness in the stock price by adding exposure.
Business Summary
NovaGold Resources Inc. operates in the mining industry.
The Company is focused on the exploration and development of gold mining properties. Its principal asset is a 50% interest in the Donlin Gold project in Alaska, Unites States.
The Donlin Gold property is located in the Kuskokwim region of southwestern Alaska. It is located approximately 20 kilometers north of the village of Crooked Creek on the Kuskokwim River.
The Donlin Gold project is owned and operated by Donlin Gold LLC, a limited liability company that is owned equally by wholly-owned subsidiaries of the Company and Barrick Gold Corporation (Barrick).
Shayne Heffernan Trade Idea
“Our current price target of NovaGold Resources will come in around $30.00 giving the stock a price increase of +242.08%.”
Price Performance
Relative Valuation
Technical Indicators
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 9.49.
The projected upper bound is: 10.08.
The projected lower bound is: 7.34.
The projected closing price is: 8.71.
Candlesticks
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 22 white candles and 28 black candles for a net of 6 black candles.
Momentum Indicators
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
Stochastic Oscillator
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 74.2647. This is not an overbought or oversold reading. The last signal was a buy 2 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 45.32. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 42 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 75. This is not a topping or bottoming area. The last signal was a buy 2 period(s) ago.
MACD
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 2 period(s) ago.
Rex Takasugi – TD Profile
NOVAGOLD RESRCS closed unchanged at 8.750. Volume was 44% below average (neutral) and Bollinger Bands were 21% narrower than normal.
Open High Low Close Volume 8.940 8.980 8.710 8.750 67,273
Technical Outlook Short Term: Neutral Intermediate Term: Bearish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 8.43 10.43 8.34 Volatility: 89 86 88 Volume: 100,665 116,601 103,897
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
Summary
NOVAGOLD RESRCS is currently 4.9% above its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods.
Our volume indicators reflect moderate flows of volume out of NG.N (mildly bearish). Our trend forecasting oscillators are currently bearish on NG.N and have had this outlook for the last 26 periods. Our momentum oscillator has set a new 14-period high while the security price has not. This is a bullish divergence.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of the NYSE Stock Market.
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Sources:
NovaGold Resources Company Website
Thomson Reuters Metastock and Eikon financial tools
Disclosure: we hold no position in NG, either long or short, and we have not been compensated for this article.
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