Gold Stocks Shine On Latest Economic Data
Another round of Americans joined unemployment lines as millions of claims came in recently. It just reminds us that COVID-19 is still here. Adding to the volatility were oil inventories that came out on Thursday. Estimates pegged the build at 1.944 million barrels with actual build numbers comping in at 7.928 million barrels of crude. Following the last few days of gold prices getting hit, precious metals and gold stocks rose on Thursday.
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Engelhard Corp’s base price for industrial gold bullion was $1,725.00 per troy ounce, up $28.00 from previous. Handy & Harman’s base price for gold was $1,717.35 per troy ounce, up $22.75. The fabricated form price was $1,906.26, up $25.25. Futures reached a high of $1,743.70 indicating a solid bounce off of its low $1,700 level.
The best part, this is in line with the trend that gold prices have seen since the start of the second quarter. Gold has maintained support above its 50-day moving average and hasn’t broken below $1,700 in over 2 weeks.
Is It Time To Consider Trading Gold Stocks Again?
This has been a continuous conversation being had recently. Thanks to a bit more volatility in the stock market today, we see gold stocks and gold prices bouncing up and dipping down more aggressively than previously. However, there are many economic indications that the gold trade idea could have a longer runway. Trade tensions continue to escalate. And while the economy reopening in the U.S. is great, we can’t forget how crazy it got when “China Trade” was the only, major headline to consider a few months ago.
Also, the big banks that made hefty predictions about gold stocks and gold earlier this year haven’t taken anything back. In fact, even more have jumped on the bandwagon. According to reports from Kitco, “Credit Suisse sees more room for upside in gold-mining stocks based on the ratio of stock prices to net asset value (P/NAV), as well as an expectation that gold prices will rise some more.”
It’s sentiment like this and underlying economic uncertainty that has lead to the trend reversals for major gold stocks. Barrick Gold (GOLD Stock Report), Newmont Corporation (NEM Stock Report), and Coeur Mining Inc. (CDE Stock Report) were just a few gold stocks bouncing off of major technical levels this week. As we discussed in this article, major moving averages have acted as strong levels of support. Whether it’s the 50-day or 200-day moving average, gold stocks have consistently responded in almost textbook fashion. This week is no different.
Some Gold Stocks Haven’t Shied Away From The Bulls
This doesn’t mean that all gold stocks have suffered to the extent of the ones mentioned. Look at companies like International Tower Hill Mines (THM Stock Report) and even Yamana Gold (AUY Stock Report). In the case of THM, the gold penny stock has been on a rampant and explosive run this year. After hitting 52-week lows of $0.3251 in March, shares have risen as high as $1.25 this week.
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The 284% move came in lead up to the company’s last few updates. First, Tower Hill announced that a work plan to prepare a pre-feasibility study was approved by the Board. This was for its Livengood project in Alaska. Furthermore, its shareholders recently approved several things at the company’s Annual Meeting. These included corporate directors and executive compensation measures.
On the other hand, Yamana Gold stock may have pared gains a bit this week but nothing to the extent of other gold mining stocks. Shares dipped about $0.77 from 52 week highs of $5.65 to weekly lows of $4.88. But it appears to have been a dip that was fleeting as AUY stock broke back above $5.20 on Thursday. The company announced it has completed the previously announced sale to Nomad Royalty Company Ltd.
This was of a portfolio of royalty interests and the contingent payment to be received upon declaration of commercial production at the Deep Carbonates Project. This is the project at the Gualcamayo gold mine and the sale price came in at $65 million. Nomad is also expected to commence trading on the Toronto Stock Exchange on or about May 29, 2020, under the symbol “NSR”.
What’s Next For Gold Stocks?
Globally, gold prices are back on the rise after tensions between the United States and China escalated. These came back about over a Hong Kong security law escalation. Meanwhile, fresh stimulus measures by several economies to mitigate the coronavirus fallout also lent some support.
In addition to this, Thursday, the second reading of U.S. Gross Domestic Product showed that the U.S. economic growth fell 5.0% in the first quarter. The data were weaker than expected. This is based on consensus figures. Interestingly enough, economists were expecting no change in economic activity from the first estimate. Among key topics, consumer spending came in slightly higher than expected. It dropped 6.8%, which is up from the initially estimated decline of 7.6%.
The report also said that exports dipped by 8.7%. This was unchanged from the previous estimate. Furthermore, imports slumped by 15.5%, which is a harsher decline from the previously estimated drop of 15.3%. Given the landscape of global economics and trade, what do you think about the future of gold stocks?
Will economies be able to bounce back sharply upon reopening causing the gold trade to dwindle? On the other hand, will the “recovery” be weaker than expected seeing gold stocks & prices flourish in 2020? Comment below.
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