The Stimulus Bill Is En Route To President Trump; a Signal To Buy Gold Stocks?
Record jobless claims and a $2.2 trillion stimulus package have helped boost interest in gold this week. Heading into the end of this wild week, gold is eyeing its biggest weekly gain since 2008. The economic damage could have been done by the coronavirus, to begin with. But the next wave of pain could come from the U.S. government.
“The market is looking to assess the impact of numerous lockdowns and business closures on the economy. Gold prices have gained further ground in anticipation of further stimulus and weaker data to come.”Standard Chartered Bank analyst Suki Cooper said in a note
The great unknown has investors hesitant on what to do next. This week saw some of the largest swings in the market in recent history. But heading into the weekend, we could be on “the eve” of the next page in the book of the U.S. economy. Right now, physical gold dealers are having a tough time meeting demand right now.
We highlighted this earlier this week. 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!”
A Base Case For Gold Stocks
Assuming the supply/demand scenario still has yet to catch up to the actual price of gold, there could be pent up demand playing a role sooner than later. On top of that, we’ve got increasing concerns over COVID-19 cases as Italy just reported a stutter step in its “lower death” trend. On Friday the country saw more than 900 deaths in a day. Meanwhile, New York City is on edge yet again as cases mount.
“The state’s total number of coronavirus deaths now stands at more than 430 — with 365 deaths in New York City as of yesterday evening. The number of people hospitalized for the virus in New York also jumped 40 percent yesterday,” reported the New York Times citing statements made by NY Governor Cuomo.
This weekend will be one to watch especially as COVID-19 cases grow. Will we see a further slow-down in the U.S. economy? We’ve heard the U.S. President express concern over the greater of two evils: opening the economy or leaving things on ice as Bill Gates had suggested. What do we know from historic gold drivers?
Low rates, slowing economies, increased demand for bullion, and market uncertainty all contribute to a flock toward safe-haven assets. Right now, the current climate could suggest just that. The lower prices for things like oil can also boost the bottom lines for gold producers.
One of the biggest costs is mining in general. Energy is a big part of that operation. The lower oil prices recently could aid to the benefit of gold miners. With so many underlying positives for gold, it would make sense to have some stocks on your list.
Top Gold Stocks This Week
While this was a wild week for all stocks including gold, there were several names that performed well. Will these be the same gold stock on your list at the beginning of next week?
|Company||Symbol||% Change From Open 3/23 to High 3/27|
|Eldorado Gold Corp.||NYSE:EGO||25%|
Obviously this is just a small snippet of the sector but clearly demonstrates the strength of gold stocks right now, as a whole. We can certainly say the same for several broad sector stocks this week. But considering the undertones of an economic slowdown, the longer-term view on gold could be bright right now. A big component of that could be what happens over the weekend.
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