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‘Churning out good cash’: Analyst says a slowdown could boost these global stocks


As the world braces for an economic slowdown in the U.S., Mathan Somasundaram, CEO of Deep Data Analytics, says he expects one global sector to get a boost. “I think the slowdown is coming and the U.S. dollar will be under pressure. And when that starts to play out, then gold outperforms,” Somasundaram told CNBC’s “Squawk Box Asia” on Thursday. The safe-haven dollar typically strengthens into recessions, but some analysts are of the view that if the U.S. tips into a downturn and the U.S. Federal Reserve needs to be more aggressive with rate hikes, the greenback could be undermined. And — given the U.S. dollar and gold’s inverse relationship — Somasundaram said he’s “pretty confident” that gold miners will be “doing okay” looking ahead. He likes those based in Australia in particular. “Aussie gold miners are churning out good cash,” he said. “They’re relatively well capitalized. They’re sitting on good cash balance sheets.” His top picks include Australian gold miners Northern Star Resources , Silver Lake Resources and Gold Road Resources . Dollar vs. gold If the greenback weakens against other currencies, the precious metal becomes cheaper in those currencies, in turn spurring demand for gold, causing prices to go up. The dollar has surged so far this year, and gold prices have fallen as a result. Gold, which has been declining since the Federal Reserve began raising interest rates in March, hit a nine-month low on July 6. On the same day, the dollar hit a near-two-decade high. However, as gold is also considered a safe haven, many analysts are expecting prices to rise if the U.S. economy stumbles. Goldman Sach has a 12 month gold price target of $2,500 per ounce. It was trading around $1,745 per ounce on Thursday. Meanwhile, Will Rhind, CEO of GraniteShares, told CNBC’s ” ETF Edge ” said earlier this month that gold is “well positioned” if interest rates destabilize and there’s some dollar weakness.

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