Gold stocks and other precious metals have long been considered inflationary hedges during times like these. But if you look at the price movement lately, it tells a bit of a different story (for now). Gold, for instance, has ebbed for the last several weeks, hovering around the $1,800 mark. Meanwhile, silver has bounced between $21 and $23.50 during the same time. But with upcoming testimony from Federal Reserve Chair Jerome Powell today, will his comments spark more upside in precious metals stocks?
Jerome Powell Speech Today
Tuesday, Fed Chair Powell prepares to deliver comments at the congressional hearing where inflation and higher pricing are likely to be the focus. He’s already pledged “to prevent higher inflation from becoming entrenched,” but that means different things to different people speculating on the topic.
“The economy has rapidly gained strength despite the ongoing pandemic, giving rise to persistent supply and demand imbalances and bottlenecks, and thus to elevated inflation…We know that high inflation exacts a toll, particularly for those less able to meet the higher costs of essentials like food, housing and transportation”Jerome Powell
Inflation is red hot right now. It’s going at its fastest pace in almost 40 years, even as the Federal Reserve suggested it be transitory. Despite all efforts, the language was removed from commentary in 2022, likely for a good reason. In addition, the Fed has also made efforts to curb bond-buying that was long-used for boosting the economy during the pandemic.
With multiple interest rate increases planned for 2022, some think it will be “interesting” to see if the Fed sticks to 3 or, as JP Morgan suggests, they may have to raise short-term interest rates more than four times this year. With this backdrop, some have begun watching traditional safe-havens for potential.
Mining Stocks To Watch Right Now
Sibanye-Stillwater (NYSE: SBSW)
If you’re looking for gold mining stocks right now, Sibanye-Stillwater has recently outperformed many of its cohorts. Following its 52-week lows of $11.15 late last year, SBSW stock has been on the move and now bounced back above the $14 level for the first time since early November. While the initial drop was due, in part, to lower expected South Africa gold output guidance for the end of 2021, industry price momentum seems to have helped give the stock a boost.
Meanwhile, Sibanye’s focus on expanding its resource portfolio remains a core focus. The company recently acquired a 19.99% stake in New Centruy Resources through an equity placement for up to $46 million. With the transaction expected to have closed in December, SBSW stock speculation has been abuzz about the deal. The deal also comes just after Sibanye reportedly advanced talks for a mammoth acquisition of 2 Brazilian mining firms for roughly $1 billion.
The miner announced it would acquire Atlantic Nickel and Minerco ValeVerde, developing copper- and gold mines. The ultimate purpose for these acquisitions is to firm Sibanye’s war chest of projects needed to meet the rising demand for critical materials used in electric vehicles.
Harmony Gold Mining (NYSE: HMY)
Another gold miner, Harmony, has made a quick turnaround in the market over the last few sessions. HMY stock managed to bounce from lows of $3.42 on Monday to highs of over $3.60 ahead of Powell’s commentary.
One of the core focus points is on Harmony’s guidance laid out last year. For 2021, the company expects to produce 2.3 million to 2.35 million ounces of attributable gold equivalent. All-in sustaining costs are anticipated between $1,020 and $1,060 per ounce compared to $1,263/ounce during the first quarter. With South Africa expecting to boost investment by 2030, eyes are on some of the top players in the region; Harmony is one of them. Specifically, South Africa wants to become a leading region for mining and lead its position in the industrial sector.
With coal, platinum, gold, and diamonds leading, South Africa seeks to enhance its offerings further. Based on its progress last year and current prospects, analysts appear bullish on HMY stock. Among eight firms covering Harmony, 5 have a Buy rating, and only 1 (Renaissance Capital) has a Sell on HMY stock.
Vale SA (NYSE: VALE)
Finally, Vale continues to be a point of interest for traders looking for mining stocks to buy. The company’s focus has been more on energy metals than traditional precious metals. As one of the largest iron ore and nickel producers, the company has made strategic investments in everything from logistics to technology to build a footprint within the industry.
Whether you’re looking at raw materials for industrialization and reopening or metals needed for meeting EV manufacturing demand, VALE stock has gained widespread attention. The company has also recently discussed its mineral resource development plans with Anglo American (OTC: NGLOY). Early discussions have outlined the potential for developing specific resources of the Serpentina Project in South America. There’s an agreement to sell its Moatize coal mine and the Nacala Logistics Corridor to Vulcan Minerals for $270 million, plus a 10-year royalty deal subject to particular mine production and coal price conditions.
These are just a few of the latest updates traders have highlighted as positives heading into the new year. With projects in over 30 countries, VALE stock remains one of the larger mining companies to watch right now.
Mining Stocks To Watch
Regardless of Powell’s commentary, we know a few things to be true. First, reopening is happening and rebuilding infrastructure is a global focus. Second, energy is going green, and raw materials companies know this. As a result, a broader focus on energy materials has emerged for countless miners worldwide. Of course, with the backdrop of inflation, precious metals can be a focus. In any case, it’s essential to understand all areas of the mining industry and how they’ll play their part in multiple industries of scale.
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