Mining Stocks Still Shine In August
Gold stocks and the price of gold have surged this year. In fact, just last week gold prices reached another historic high of $2,089.20. Following multiple days of surging gold momentum, the precious metal has consolidated at the start of the week. A bit of positive sentiment in the stock market today comes from the U.S. President’s actions over the weekend to extend unemployment benefits and enact other fiscal moves to sustain the economy a little while longer.
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Does this recent pullback from highs mark the end of the golden bull? According to many analysts, a pullback was expected but longer-term outlook from some could see gold prices higher still. Frank Holmes, CEO of US Global Investors told CNBC Monday that, “It’s quite easy to see gold going to $4,000.”
He explained the simple economic make-up right now could have a clear impact on gold. Holmes said rising stimulus being enacted by central banks is causing gold to soar to unprecedented levels. G-20 finance ministers and central banks are “working together like a cartel and they’re all printing trillions of dollars,” he added.
But it isn’t just gold shining, other metals have also followed suit. Silver prices are among the highest they’ve been in years. In fact, as gold pulls back on Monday, the price of silver has come within less than 50 cents of testing 2020 highs. Additionally, it’s good to note that silver prices haven’t traded this high since 2013.
Where Are Mining Stocks Heading From Here?
In light of the recent surge in numerous metals, gold stocks might not be the only thing investors focus on. In general, mining stocks could be a better focus. Not only are traders looking for exposure to gold but also to silver and even palladium, rhodium, and other metals. iShares Silver Trust ETF (SLV) reached a new 2020 high on Monday with the price hitting $27.39 during the morning session.
Silvercorp Metals (SVM Stock Report) also reached a new high for 2020 this week. Monday saw shares of SVM stock surge from an open of $7.54 to highs of over $8 by the lunch hour. This move came just a few days after the company reported its quarterly results. Last week, Silvercorp reported higher fiscal Q1 2021 results. The company mined 254,555 tons of ore, down 1% compared to the prior-year quarter. However, it reported $15.5 million in net income with cash flow from operations of $30.1 million.
Silvercorp sold approximately 1.9 million ounces of silver, 1,100 ounces of gold, and 20.9 million pounds of lead. This represented an increase of 1%, 10%, and 17% in silver, gold and lead sold.
U.S. Steel (X Stock Report) shares were also trading higher on August 10th. The strength came with positive macro sentiment after the recent orders signed by President Trump over the weekend. If you recall, tariffs on Canadian aluminum were reinstated. This move extended U.S. Steel’s micro-bull-run for a 6th day since hitting lows of $6.63 at the end of July. In light of this, other companies like Cleveland Cliffs (CLF Stock Report), Alcoa (AA Stock Report), and ArcelorMittal (MT Stock Report) experienced an uptrend this week.
A Diversified Approach To Mining Stocks?
Are mining stocks the best way to gain exposure to more than gold? I would say that the obvious answer is yes. Right now, not only are gold stocks gaining attention, so are other metal stocks like silver.
“Silver continues to outperform and remains our precious metal favorite as a clean positioning slate, strong investment flows and robust industrial demand combine for strong performance at a time when the microstructure creates a disincentive for silver bullion traders to sell,” TD Securities strategists wrote in a note.
“The bulls are vulnerable to a modest consolidation in the macro drivers that have supported gold length over the past few months. As positioning has grown to increasingly bloated levels, leaving little dry-powder remaining for the bulls, the frenzied retail speculation has further increased the risks of a positioning squeeze for gold bugs,” the strategists added.
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