Gold Prices Trade Steady In Early June
Looking for gold stocks to buy? Now may be the time to start considering the market metrics. During the first week of June, the price of gold hasn’t been as volatile as it was at the end of May. That could be due, in part, to the latest rounds of riots across the country. We also can’t forget that as thousands of people demonstrate, we’re in the midst of a pandemic that still has most of the global economy working at 50% or less.
So, if you’re looking for gold stocks to buy right now, it may be best to pay closer attention to what the commodity is doing. What we know is that production figures are likely to be a bit lighter due to the economic shutdown earlier this year. A number of mining regions were restricted due to COVID-19 which could have put a pause to operations in mid-Q2. Needless to say, the technical levels for gold have remained consistent and upheld even during times of pull-backs in the market.
“The yellow metal sees support near the $1,725 per ounce, even though the buyers lose appetite approaching the $1,750 mark on uncertainty regarding a renewed risk selloff despite unpromising news from the U.S., China front,” wrote Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
A weaker dollar has also helped boost gold prices in light of broad-sector stocks making new highs. In general, when we see general markets heading higher, gold takes a back seat along with other safe-havens. However, as we can see, even as the S&P moves higher, gold stocks haven’t wavered. Again this could be due in part to the dollar’s weakness right now.
Economic Conditions Support Gold Stock Momentum
We can’t ignore the macro situations going on right now. Even if the economy goes ‘back to normal’ stimulus measure just added trillions to the balance sheet’s liabilities. On top of that the Federal Reserve’s no rate policy right now further supports bullish gold. Analysts at Standard Chartered think the “Hail Mary” scenario for the Fed could be looming. This takes into consideration that talks have begun to surface regarding a possible rate cut to -0.5% and -1%.
“No one likes trying a ‘Hail Mary’ from midfield as the clock ticks down when you are losing, but you kick the ball a long way in that situation – there is no point to a short pass,” Standard Chartered.”Although the USD is a not a key driver for gold prices in the current environment, the relationship between the two usually strengthens during period of USD weakness. Thus, our expectations of a weaker USD in most scenarios intensifies the positive backdrop for gold prices.”
Considering the fact that this is just one piece of the pie, gold stocks could grow in attention. Keep in mind that there’s still that U.S. / China trade deal “floating around” right now. The issues are becoming harder to resolve especially considering that both sides are trying to “win”. This is also in light of recent concerns regarding Hong Kong. Last week, U.S. President Donald Trump said he was directing his administration to start the process of eradicating special treatment for Hong Kong. This was in response to China’s plans to impose new security legislation. China said it will counter U.S. attempts to harm Beijing’s interests.
Where Does This Leave Silver & Gold Stocks?
Right now, gold stocks have moved more in step with gold prices than on their own. If you look at some of the more active gold stocks this week, you’ll see that too I think. Barrick Gold (GOLD Stock Report), Newmont (NEM Stock Report), and even First Majestic Silver (AG Stock Report) have upheld a consistent trend in light of recent events. The latter, First Majestic, has weathered the storm a bit better recently.
The companies diverse exposure to other metals may have helped it attract different investors outside of the “safe have” group. The company saw B. Riley FBR boost its price target from $6.75 to $8. While this was the case, the analyst maintained a neutral trend on AG stock, overall. Keeping this in mind, a comparison between a few ETFs might help give a better look at where the metals sectors have diverged a bit.
Silver’s attraction beyond a store of value has helped aid it is actually trending higher instead of treading water over the last few weeks. Take a look at the iShares Silver Trust ETF (SLV Report) in comparison to the SPDR Gold ETF (GLD Report) and you’ll see an overall bullish trend. However, the slope of that climb is much steeper over time for silver compared to gold.
From mid-March to early-June, silver climbed over 50%. GLD, during that same period, climbed roughly 20%. The main difference is that major headlines haven’t hurt gold but conflicting “push/pull” news hasn’t helped either. In any case, the argument in favor of higher gold and silver prices may be strong than an argument against in light of very recent global economic events.
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