S&P/ASX 200 Index (ASX: XJO) gold stocks were riding high heading into May.
While there were various company-specific headwinds and tailwinds at play, the gold miners all benefited from a fast-rising gold price.
On 5 May, the yellow metal topped US$2,050 per ounce, according to data from Bloomberg.
That was up more than 13% from the US$1,814 per ounce gold was trading for just two months earlier, on 8 March.
But a rising greenback (gold is priced in US dollars) and increasing odds of further interest rate increases by the United States Federal Reserve have reversed the rising gold price trend over the past few weeks.
At least, for now.
Today gold is trading for US$1,958 per ounce.
How have ASX 200 gold stocks held up?
As you'd expect, the 4.5% retrace in the bullion price on 5 May has sent most gold miners sharply lower.
Since the closing bell on 5 May, the ASX 200 is down 1%
Over that same period, the S&P/ASX All Ordinaries Gold Index (ASX: XGD) – which also contains some smaller miners outside of ASX 200 gold stocks – has fallen a much steeper 12%.
That fall has been broadly mirrored by Northern Star Resources Ltd (ASX: NST), with the big miner's shares down 10% since 5 May.
It's possible the Northern Star share price could slide further from here in the short term. But over the medium term, this ASX 200 gold stock is now looking like a real bargain to me.
Why Northern Star shares are at the top of my watchlist
I don't own Northern Star shares as I pen this.
But after the big retrace of the past two weeks, the gold miner is looking like a real bargain.
That's because most analysts, myself included, are forecasting gold will move higher in 2023.
Macquarie analysts are amongst those with a bullish view on the gold price.
Last week, they noted:
We still expect [gold] to test the 2020 nominal high of US$2,075 and likely break above it, entering uncharted territory. The last time this occurred was in 2020, when the 2011 high of US$1,921 was taken out, with prices rallying a further US$154.
There's no guarantee the gold price will retest or exceed its all-time highs.
But if gold resumes its march higher over the coming months, as I expect, it would benefit all ASX 200 gold stocks, including Northern Star.
On a company-specific level, there's a lot to like about the miner, including its strong balance sheet.
As at 31 March, when the miner reported its quarterly results, Northern Star had $102 million of net cash.
While gold sales and revenue dropped over the quarter, that was mostly due to an unplanned three-week shutdown at its Alaskan Pogo mine.
Northern Star managing director Stuart Tonkin acknowledged the difficult three months. However, the ASX 200 gold stock maintained its full-year production guidance of at 1.56 million ounces to 1.68 million ounces of gold.
Tonkin commented at the time:
This quarter was a challenging one for Northern Star, but we have emerged with positive momentum, and the prospect of improved production across the group, to remain on track for a strong finish to financial year 2023.
And in a promising sign for future production, on 4 May, Northern Star announced a 3.5 million ounce increase in its mineral resource to 57.4 million ounces, highlighting the success of its ongoing exploration campaigns.
This increase balanced out mine depletion and divestments over the year, leaving Northern Star's total ore reserve unchanged at 20.2 million ounces.
And while this ASX 200 gold stock may not top the list for passive income investors, it did deliver 22.5 cents per share in fully franked dividends over the last 12 months.
Adding in those dividends, the accumulated value of Norther Star shares over the full year has increased by 41%, despite the recent slide.
And I believe the miner is well-placed to offer more outperformance in the year ahead.
