Gold Demand Could Outpace Supply: Perfect For Gold Stocks?
Right now there could be a hidden market for gold. One that suggests pent up demand has driven gold prices higher even compared to Wall Street figures. In an article on MarketWatch, Josh Strauss, partner at money manager Pekin Hardy Strauss in Chicago gave his take.
“There’s no gold. There’s roughly a 10% premium to purchase physical gold for delivery. Usually, it’s like 2%. I can buy a one-ounce American Eagle for $1,800; $1,800!”
It would appear that major gold dealers are selling out of physical gold right now. Amid the global panic, people are apparently racing to buy hard assets in gold coins and bars. So should gold really be trading higher right now? On Thursday, futures prices reached $1,672.50.
While this is much higher than it was a few weeks ago, it’s still off from the $1,704.30 from earlier this year. Still, though, Strauss’s comments raise some questions as to the real market value of gold. Fundamentally it makes sense as the Federal Reserve and U.S. government are shelling out fresh greenbacks to support the economy.
Gold Stocks Shed Losses In Exchange For New March Highs
While gold prices are one thing, gold stocks are another. Right now, it seems like Wall Street hasn’t noticed the disparity in pricing so far. Due to the shortage, the potential for pent up demand to spill over into the market could only be a matter of time. Right now on major gold sites like JM Bullion, there’s over a 2-week wait alone. So what could be some gold stock to watch right now?
IMC International Mining
Well, if you think the gold boom is coming, junior gold stocks tend to perform much better than larger gold names. This is generally due to a more speculative climate and lower-priced gold stocks. Take, IMC International Mining (IMCX Stock Report)(IMIMF) for instance. The company is building its asset portfolio right now and is in the final stages of a major acquisition. In February the company announced that it looks to acquire Thane Minerals and its Cathedral Property.
In a conference call earlier this week, incoming Chairman Greg Hawkins expressed the goal of beginning exploration by May and starting the drilling process before the end of the year. By any stretch, this is an aggressive stance for a mining company. But considering the location and the “audience” as Hawkins put it, Cathedral could be IMC’s opportunity to strike gold first. Shares have climbed from lows of $0.25 to highs of $0.33 already, this week.
Other companies like Yamana Gold (AUY Stock Report)(YRI) have been more closely tied to the market’s gold price than anything recently. Shares slumped earlier this month when gold dropped. Since then Yamana gold stock has managed to battle back. As of this week, shares have jumped from lows of $2.57 to highs of $3.52 on Thursday. Yamana gold stock has reached higher highs each day since Monday (3/23).
In its operations update from the 24th, Yamana discussed its action plan for addressing COVID-19. The company said it will temporarily suspend all “non-essential business” until mid-April. As of the company’s update, there were no suspected or confirmed cases of COVID-19 at Canadian Malartic or any Yamana operation.
Moving up in price, Barrick Gold (GOLD Stock Report) (ABX) has continued its bullish climb amid the government’s stimulus buzz. On Thursday, shares of the leading gold stock hit highs of over r$20 for the first time since March 10th. Similar to Yamana, Barrick also released preliminary guidance related to COVID-19.
“Barrick has a strong culture of caring for the welfare of its employees and communities. Our financial strength, well-established prevention practices and procedures, and the experience we gained from dealing with two Ebola pandemics around our African operations, will stand us in good stead as we face this new and unprecedented challenge.”President and Chief Executive Mark Bristow
This comes as the $1.2 billion First Eagle Gold fund has “the most senior gold-mining companies in the portfolio” including Barrick gold stock along with Newmont (NEM Stock Report). It should also get pointed out that Deutsche Bank recently upped its price target on the stock. Previously, the bank set its target at $22 but has since boosted it to $25. Right now it maintains a Buy rating as well.
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