It’s been a long-awaited journey since 2011. That’s when the price of gold reached all-time highs. While 2012 was a formidable match, it never saw gold prices come close to those levels. Ever since then it’s been a waiting game as the global economies seemingly gained strength and the necessity for gold as a hedge dwindled. Fast-forward to August of 2018 and we started to see early signs of another bull run in gold. But would it last or would it fizzle as it did in 2017 and in years prior?
While there were signs of hope for gold, the general economic situation couldn’t justify higher gold prices in my opinion. Also, we didn’t see the same fear we saw in 2011 and the 3 years leading up to it. Right now, however, there could be a perfect storm for gold and that storm may only be just getting started.
While the economy is rallying on “new hope” there are plenty of economic indicators that don’t seem to get attention. And if the saying is true: When they’re crying, they’re buying & when they’re yelling, they selling” then it seems that there’s certainly a lot of yelling going on while the entire economy is still shutdown. Needless to say, this exuberance in broader sector stocks like Tesla (TSLA Research Report) or even GameStop (GME Research Report) is to be expected. Who isn’t going out to buy an electric car right now?
And I don’t think I could even begin counting the number of videogame stores with the door wide open to sell the latest NBA2K game considering all the popular players on the court right now. Needless to say, there are major factors that seem glaring right now and organizations like The International Monetary Fund are preparing for something big.
Recessionary Fears Lead Flight To Gold & Gold Stocks
The IMF predicted the “Great Lockdown” recession could be the steepest in almost a century. It warned the world economy’s contraction and recovery may even be worse than anticipated if the coronavirus lingers or worse, returns. According to reports from Bloomberg, “The IMF estimated on Tuesday that global gross domestic product will shrink 3% this year. That compares to a January projection of 3.3% expansion and would likely mark the deepest dive since the Great Depression. It would also dwarf the 0.1% contraction of 2009 amid the financial crisis.”
Meanwhile, as we speak, gold prices just made another new high for 2020 ($1,788.80). Furthermore, you’ve got both big- and small-name gold stocks pushing higher this week. Some of them are even hitting new 2020 highs themselves. Barrick Gold stock (GOLD Research Report) for instance broke to highs of over $25 for the first time since April of 2013. Newmont Corp. (NEM Research Report) has exploded to highs of $61.53. This is the highest Newmont gold stock has traded since February 2012. Franco-Nevada gold stock (FNV Research Report) rallied to highs of $127.85 this week; it’s highest ever.
And while these big moves are incredible, you can’t ignore the percentage gains from small-caps either. Kinross Gold stock (KGC Research Report) moved to highs of $6.64 which is just 1 penny shy of levels from June of 2013. New Gold stock (NGD Research Report) moved to nearly $12 ($11.90). This price was only a distant memory from where it traded 2012 until now. Obviously these are just a handful of examples but the fact remains: gold stocks are red hot right now and deserve at least a little bit of attention.
During times like this, while Barrick gold stock has made a big move in the sense of dollars, the smaller-caps are the ones that delivery some of the most significant percentage gains according to history.
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