While the gold price has come under pressure in recent weeks, most analysts agree that the precious metal will stay at lofty levels for some time to come.
In light of this, it could be a good idea to have some exposure to gold in your portfolio.
But which ASX 200 gold share could be in the buy zone now? Let's take a look at one that Goldman Sachs is bullish on and is tipping as a buy.
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Which ASX 200 gold share?
The gold miner that Goldman is bullish on is Gold Road Resources Ltd (ASX: GOR).
Its shares rocketed on Monday after De Grey Mining Limited (ASX: DEG) agreed to be acquired by Northern Star Resources Ltd (ASX: NST) in a $5 billion deal.
Given that Gold Road owns a ~17% stake in De Grey Mining, it stands to benefit from this transaction and any potential competing offers.
In response to the news, Goldman said:
If the NST-DEG transaction completes (or attracts further competing proposals) we would see this as a positive for Gold Road Resources which own ~17.3% of DEG, with the implied acquisition price above our prior proportional NAV and potentially adding ~A$0.8bn to GOR's already net cash balance sheet (at current valuations should GOR sell their DEG stake or resulting NST shares where NST/DEG noted that GOR have historically been supportive of DEG, and that they are aware of the transaction with a decision to support the proposed acquisition up to GOR).
It also feels that this news could be the catalyst for a re-rating for the ASX 200 gold share, which it notes trades at a discount to peers. It said:
We note GOR also hold neighbouring leases to Hemi which may become attractive future development options at the project. Furthermore, with the possible sale of the DEG stake, we see potential support for GOR to re-rate on its own fundamentals, with the stock currently trading at a significant discount to peers at (~3.5x EV/EBITDA, ~1x NAV, and ~US$1,870/oz LT gold; peer average 5.7x/1.2x/~US$2,130/oz respectively), where closing half this gap would add >10-20% to valuation.
Time to buy
According to the note, the broker has retained its buy rating on the ASX 200 gold share with an improved price target of $2.35.
Based on its current share price of $2.04, this implies potential upside of over 15% for investors over the next 12 months.
