Western Australia based gold producer Saracen Minerals Holdings Ltd’s [ASX:SAR] share price has this morning continued to rebound from the lows of the coronavirus crisis.
Thanks to some solid quarterly results announced today, shares in SAR were up 1.53% to $4.63 in opening trade this morning.
This brings the SAR share price to a 68.71% gain in the past 12 months.
It has reacted strongly to the changes in the price of gold, particularly with the increase in market volatility over the past few months.
With the gold price stabilising in US dollar terms — up significantly in Aussie dollar terms — and market being injected with massive amounts of stimulus, we ask could SAR be a great bullish play?
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Quarterly results announced this morning could be giving some shareholders something to smile about.
Q3 saw a record gold production of 158,132 ounces at an all-in sustaining cost (AISC) of $1,133 per ounce.
Bringing production for nine months to 374,584oz at AISC of $1,081/oz.
Not bad when you have sold 165,798oz at an average price of A$2,228/oz — a record price for SAR — generating revenue of $369 million.
Sound management may be playing a role here.
The miner has retained its FY2020 guidance of producing 500,000-plus ounces of gold, saying it managed to dodge the significant effects of COVID-19 disruption.
The company has increased the size of its gold hedge despite the recent run up in gold price too.
You never know what’s going to happen.
Management also increased their cash holdings by $57 million to $340 million which also seems sensible enough.
This goes with an early debt repayment of $25 million, helping sure up the books.
Processing of high-grade stockpiles will also be brought forward this quarter to provide an additional buffer against any operational impacts of the current pandemic.
So where does this leave the Saracen share price?
The relative strength index (RSI) at the bottom of the graph above shows strong upwards momentum but is close to being overbought (above 70).
With trading volumes waning since mid-March, we might see that trend begin to reverse and the share price stabilise.
This could indicate that SAR’s share price may currently be at its upper limit for now.
Looking a bit further ahead, the Moving Average Convergence Divergence (MACD) graph above might hint to a more bullish outlook as the MACD line (blue) remains above the signal line (orange).
With SAR just under its peak in August, but not yet breaking out of the RSI ‘overbought’ range, it’s conceivable that it still has a way to go before we see a dip in the price.
As for a long-term outlook, if we continue to see strong upwards movement in the gold price in AUD terms, SAR may be well positioned for a march upwards.
While there are never guarantees in this crazy market, if current trends continue, there is a chance that momentum will carry the SAR share price to $6 by the end of the year.
Picking gold stocks can be a challenging endeavour, not to mention picking quality gold stocks.
If you are interested in getting tips and tricks on how to pick a winner like Saracen Minerals so far appears to be, then check out our free report. In it, Rum Rebellion editor Greg Canavan runs you through his system.
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The Rum Rebellion