Gold Stocks Slide On Hope Of New Economic Strength
Gold stocks and the price of gold slid on Thursday with new economic data pushing hopes higher for a recovery. First-time filings for unemployment insurance totaled 2.44 million last week. This was just a touch higher than analysts expected. However, it brings the total unemployment during the coronavirus pandemic to 38.6 million. Overall, the total has fallen for 7 straight weeks from the record peak. This has sent some optimism across the market early on Thursday.
With an increase in positive economic sentiment, the markets are finding a lesser need for safe-haven investments – for now. Some market analysts suggest that this latest pullback in gold prices is long-awaited. As Jim Wyckoff of Kitco stated earlier today, this is likely a “routine downside corrections following recent gains.” There was also an early rally in oil prices on Thursday. While this has since subsided, the initial sentiment has investors paying attention to headlines heading into the middle of the May 21st session.
Then we’ve got China to talk about, which has impacted the dollar putting pressure on the price of gold Thursday. The “dollar has rebounded off increased trade tensions between the U.S. and China. In addition to the trade influenced bounce in the dollar, we also see threats of trade conflict keeping the Chinese economy in a slower climb out from the lock down and that in turn could hold back improvement in Chinese physical gold demand,” Zaner Metals analysts said.
Is The Bull Run Over For Gold Stocks?
This, in my opinion, isn’t quite a “usual market pullback” that some may suggest. While there’s still plenty of things to justify bullishness in gold, the market has become trained to reacted off of near-term headlines. This is as opposed to the basic economics of some of the financial stimulus we’ve seen over the last 2 months or so. In a low rate environment, it may not be today or even this year. But in the future, there needs to be a balance to all of these stimulus dollars along with 0%-0.25% rates.
Thursday we didn’t just see a “pullback”. This was an outright gap down in gold stocks and gold prices. Futures closed May 20 at $1,751.40 and dropped to lows of $1,715.30 on the 21st. Just to give you an idea, the price of gold hasn’t seen these levels since May 13th. Furthermore, gold prices haven’t dropped this much in a single day since April. On May 21, gold prices dipped just over 2% from open-to-low. While this 1-day drop has come close over the last few weeks, 2% or more hasn’t been the case since April 30th. That’s when gold prices dropped from $1,729.60 at the open to lows of $1,687.50.
While a drop like that hasn’t occurred this week so far, it could create an interesting scenario for gold stocks. The general market trend has seen prices climbing continuously. Mean while, there haven’t been many “big discount” opportunities to take advantage of. Could Thursday’s slide present such an opportunity?
Which Gold Stocks Are Pulling Back The Most?
Some would assume that junior gold stocks suffer the most. This is true, in general, but it doesn’t negate the fact that some of the major gold mining stocks are feeling the pressure. Among lower priced gold stocks DRD Gold (DRD Stock Report) has suffered one of the biggest blows on Thursday. Considering that DRD stock was trading above $10 earlier this week, it’s wild to see it back below $9.30. Since the open, alone, DRD Gold stock has dropped by more than 10% as of its morning low on May 21.
- What Are The Best Gold Stocks Today? 4 Names To Know
- Gold Prices Stutter Step On Monday; Should Investors Worry?
SSR Mining (SSRM Stock Report) also took a hit on Thursday. Shares of SSRM stock opened slightly lower than it closed at on Wednesday. After this lower open, SSRM continued to slide. The gold stock ended up dropping to a low of $20.43 during the morning session. This marked a 5.4% drop from the opening bell. Just 2 days ago, B.Riley FBR lowered its price target on the gold stock to $44. However it maintained the current Buy rating on SSRM stock.
Even Barrick gold stock (GOLD Stocks Report) wasn’t immune to the selling pressure. Similar to SSRM stock, Barrick gold stock also gapped down slightly on Thursday. Shares closed at $27.25 on May 20 and opened at $26.96 on the 21st. The slide extended a now, two-day dip in shares of Barrick gold stock. Thursday’s drop saw a single-day decline in Barrick of 5%.
Over the last two sessions, Barrick gold stock has dropped 9.4% since opening at $28.29 on May 20th. The interesting part is after scouring through a number of gold stocks, there aren’t many at all that are green. Among that list of gold stocks, the ones that were didn’t have substantial volume to make notable mention of.
Is This The End Of The Road For Gold Prices?
For the most part, gold stocks have been moving in tandem with the price of gold. Where some released headlines over the past few weeks, precious metal prices have become a bigger driver. With this in mind, it might not be a bad idea to look at gold price technical analysis. Some of the technical levels of gold, in general, remain intact right now.
Prior to reaching recent highs of $1,775.80, the price of gold maintained a relatively sideways trend between lows of $1,665 and $1,765. Major support appeared to be at the lower end of that range with the next minor support level holding around $1,690.
When you put things into perspective like this, Thursday’s drop is notable but hasn’t tested the strength of the overall trend thus far. Are you a buyer of gold right now or looking at the sell-side? Leave us a comment and let us know.
Midam Ventures, LLC | (305) 928-8939 | 1501 Venera Ave, Coral Gables, FL 33146 | email@example.com