Shares of AngloGold Ashanti Limited (NYSE:AU) have pulled back to trade at around $23.80 after an extended period of gains. The stock now appears to have found support around this level, which could trigger the next rebound. The rebound could also be fueled by recent talks that the Federal Reserve will start reducing its asset purchase in the fourth quarter of this year. Under normal circumstances, a Fed taper boosts stock prices while the price of gold suffers, but there is an expectation that the opposite could occur amid economic fears.
Simply put, AngloGold might be the best gold stock to buy now.
Why a Fed taper could boost the gold price
The global economy is still suffering from the adverse effects of COVID-19 and this means that it could be too early to assume that the worst days are behind us. The US, in particular, was one of the worst affected countries. The world’s greatest economy has spent trillions of dollars in stimulus packages to try to boost economic growth.
Therefore, there is great concern that if tapering begins too soon, this could upset the current economic stability that is highly supported by the government’s quantitative easing program.
The government has been injecting money into the economy through asset purchases and if the floodgates are sealed prematurely, it could result in another economic crash. The fear of a financial crisis will drive more investors towards safe-haven assets like gold.
The recent rise in the gold price suggests that Fed’s taper talk is already sparking fear. A rise in the gold price could boost AngloGold’s stock price further in the coming months. The stock is currently trading at an exciting P/E ratio of 10.15.
