In stark comparison to Wednesday, gold stocks are rebounding on May 7th. If you take a quick look at the Direxion Daily Gold Miners Index Bull 2X Shares (NUGT Report), you’ll see a strong move on Thursday. But if you take a look at the price of gold, you’ll see exactly what the excitement is all about. After dropping to lows of $1,683 on May 6, gold prices bounced strong on the 7th hitting highs of $1,728 during the early afternoon. This wasn’t a consistent move but an abrupt one that began around 11 AM EST.
A climb in weekly U.S. jobless claims aided the bouillon’s trading momentum. Nearly 3.2 million people applied for unemployment benefits last week as the coronavirus continues to strangle the economy. The number of initial jobless claims processed in the week ended May 2 was less than half the crisis peak of 6.9 million at the end of March. But, still roughly 33 million new claims have been filed in seven weeks.
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Tomorrow we’ve got the monthly employment report from the U.S. Labor Department. It’s expected to show a loss of more than 20 million jobs in the month of April with an unemployment rate above 15%. Meanwhile, aggressive monetary policy easing by major central banks continues to offer gold som support. Albeit the fact that the U.S. dollar is rising doesn’t help, it hasn’t seemed to hurt the price of gold either.
Economic Data Weighing Heavier Than Market Hopium
It’s not the “norm” for stocks and gold to move in tandem. Despite the fact that the market is reacting favorably to “fewer people filing for unemployment,” gold prices and gold stocks are surging. Direxion Daily Gold Miners Index Bull 2X Shares has finally firmly tested its 50-day moving average for the first time since March.
On the 6th NUGT was denied at the 50 DMA and then we saw the massive selloff in gold and the markets. Since then NUGT has made attempts to steadily recover. Instead of the more v-shaped bounce that gold prices have seen, NUGT has realized more of an L-shape recovery so far.
Meanwhile, we’re seeing the price of gold rapidly jump back toward that $1,730-$1,740 range. This has been a relatively consistent mid-point in the latest sideways trend that gold prices have sat in since the second week of April.
So What Does This Say For Gold Stocks?
We know that it’s earnings season. In light of this, there are several companies that are reporting and have reported earnings. But I’ll be the first to say that when it comes to a list of gold stocks to watch, the price of gold has a heavier weighting on directional trends. Case in point, we saw earnings from Kirkland Lake (KL Stock Report) earlier this week. The results were positive, yet Kirkland Lake gold stock dropped.
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What was the catalyst? Gold prices were dropping on that date. So if you’re new to gold stocks, it’s important to understand that the broader sector trend – mainly gold prices – carry a lot of weight. Needless to say, on Thursday, Kirkland Lake gold stock has rallied strong. Compared to its low this week of $41.34, KL stock has managed to bounce back by more than 4.5% so far.
Newmont gold stock (NEM Stock Report) was another company reporting strong earnings this week. Fortunately, it was on a day where gold prices were on the rise. While NEM stock dropped lower yesterday, its current uptrend continued on Thursday. Shares of Newmont gold stock jumped to highs of nearly $65 by 2 PM. The current 52-week high is $65.06 which was reached on Tuesday.
Cheap Gold Stocks Aren’t That Cheap Anymore
This trend has echoed across gold stocks today. Take a look at former gold penny stocks like Yamana gold stock (AUY Stock Report) and Kinross gold stock (KGC Stock Report). Both were stocks under $5 just a few weeks ago. Fast-forward to right now and now we’ve got both Yamana gold stock and Kinross gold stock reaching or nearing new 52-week levels.
On Thursday, Yamana gold stock reached highs of over $5.09 for the first time in years. Again, it came on a day that there were no company headlines, only a big move for the price of gold. Earlier this week the company provided an update on the Phase 2 expansion of its Jacobina mine. The Phase 2 expansion “strategically positions Jacobina to generate further value bringing forward cash flows and increasing its leverage to gold prices”.
As far as Kinross gold stock is concerned, it has come within pennies of testing its current 52-week high. Last month KGC stock reached highs of $7.25 before retracing back to the $6.30-$6.40 range. This week the company reported its quarterly results too for the first quarter of 2020. Highlights included production of 567,327 attributable gold equivalent ounces (Au eq. oz.), and sales of 552,742 Au eq. oz. Furthermore, during the first quarter, all Kinross mines remained in operation and were not materially impacted by COVID-19.
“Continued record growth for gold-backed ETFs, despite some rebound in other asset classes, highlights that investors are embracing gold’s role as a store of value and source of liquidity and returns,” Juan Carlos Artigas, head of research at the World Gold Council, said in a statement. Will this trend continue to persist and how high will the price of gold soar in 2020?
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