The New Year began with a bang for gold with the yellow metal hitting a two-month high of $1,103 an ounce yesterday, triggered by a stock market rout, renewed worries over the state of the Chinese economy and heightened geopolitical tensions.

Weak Chinese Data, Faltering Market: Disappointing factory sector data out of China continues to stoke growing fears about the country's economic recovery dragging the benchmarks lower. China manufacturing purchasing managers’ index (PMI) declined to 48.2 in December from 48.6 in November, according to Caixin Media Co, the 10th straight month of a below 50 reading.

A new circuit-breaker system for the Shanghai stock market got triggered on the very day of its introduction, with the Shanghai Composite ending the session down 6.8% on Jan 1. This was due to the huge sell-off following the weak PMI survey and a depreciating currency. The circuit breaker requires a 15-minute pause in trading if the CSI 300 falls 5% within half an hour.

This was to be followed by more downbeat economic data released yesterday with the Chinese Caixin services PMI coming in at 50.2 in December from 51.2 in November. The December number was the lowest in 17 months. The world currency markets are jittery as the Chinese yuan has plunged to a five-year low today and to a record low versus some other currencies.

Trading was once again suspended today after the market index, the CSI 300, nose-dived 7% only half an hour after markets opened. The benchmark Shanghai Composite Index fell 7.3% to 3,115.89 while the Shenzhen Composite Index slumped 8.3% to 1,955.88.

World Bank Cuts Global Growth Forecast: The World Bank on Wednesday cut its global economic growth forecast for 2016 to 2.9% from its June forecast of 3.3% growth. Flagging performance from the top emerging economies as well as anemic showings from the developed countries such as the United States led to the downgrade.

Rising Political Uncertainties: North Korea has raised alarm with its announcement on Jan 6 that it has successfully carried out its first underground test of a hydrogen bomb, a more powerful weapon than an atomic bomb. If the claims are to be believed, it would be its fourth nuclear test since 2006 and a huge stride in its nuclear capabilities. This move has drawn flak from all the international major powers including United States, Britain, China, Russia, Japan, France and India.

The news came just days after tension intensified between Saudi Arabia and Iran following the former’s execution of a prominent Shiite cleric. Saudi Arabia has cut diplomatic ties with Iran after its embassy in Iran was attacked by people who were protesting the execution of the cleric.

FOMC Minutes: Gold also gained on the release of the minutes of the latest Federal Open Market Committee (FOMC) meeting. Though the minutes revealed nothing new, it stated that any future rate hike would be gradual. Further, the monetary policy will remain sufficiently accommodative to support further progress in the labor market and rising inflation.

All eyes are now on Friday morning’s key U.S. jobs report. It could reinvigorate the U.S. stock market, if data proves to be stronger than analysts’ forecasts. Consensus forecasts point to a rise in 204,000 jobs in December,

The yellow metal is often considered an alternate investment during periods of political and financial insecurity. However, these rallies are usually short-lived. The metal faces another tough year as U.S. interest rates are expected to rise and the dollar strengthen, with analysts predicting further price drops. The Federal Reserve raised U.S. rates for the first time in a decade last December, and is expected to lift them further this year. Higher rates dent demand for non-interest-paying gold, while supporting the dollar.

In this situation, we recommend four stocks in the gold mining sector which are trading at cheap prices and offer great buying opportunities for patient investors, given their sound Zacks Rank #2 (Buy). These picks have also been witnessing positive earnings estimate revision, which implies that analysts are increasingly bullish on the stocks.

AngloGold Ashanti Ltd. AU

Headquartered in Johannesburg, South Africa, AngloGold Ashanti Limited operates as a gold mining and exploration company. It also produces silver, uranium oxide, copper, molybdenum, and sulphur. The company has 20 operations and exploration projects in South Africa, Continental Africa, Australasia, and the Americas.

AngloGold is currently trading at a P/E (F1) of 15.12x, much lower than the peer group average of 30.92x. The Zacks Consensus Estimate for 2016 has moved north 58% over the past 60 days. It has an expected EPS growth rate of 4.80%.

Primero Mining Corp. PPP

Primero Mining is engaged in the acquisition, exploration, development and production of precious metal properties in Canada and Mexico. The company explores gold and silver. It owns interest in the San Dimas Mine, located in Mexico’s San Dimas district and the Black Fox Complex, located in the Timmins Mining District in Ontario, Canada.

Primero Mining is currently trading at a P/E (F1) of 19.05x, much lower than the peer group average of 34.78x. The Zacks Consensus Estimate for 2016 has witnessed significant upward revision of around 71% over the past 60 days.

Sibanye Gold Ltd. SBGL

Based in Westonaria, South Africa, Sibanye mines gold from its four major operations, Driefontein, Cooke, Beatrix and Kloof.

Sibanye Gold is currently trading at a P/E (F1) of 13.0x, much lower than the peer group average of 23.45x. The Zacks Consensus Estimate for 2016 has moved north 20% over the past 60 days. It has an expected EPS growth rate of 25.4%.

Timmins Gold Corp. TGD

Headquartered in Vancouver, British Columbia, Canada, Timmins Gold is a Mexico-focused intermediate gold company with a portfolio of high-quality production and development assets.

Timmins Gold is currently trading at a P/E (F1) of 6.57x, much lower than the peer group average of 25.85x. Analysts expect the company to report profit per share of 2 cents in fiscal 2016, as against the earlier expectation of a loss per share of 1 cent per share 90 days back.

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