Gold Miners Stocks are Shining in this Rally Too


Spot Gold hit new 6-year highs and is trading late Monday at $1,526.89 oz as I write this article.

The precious Yellow metal has rallied in Y 2019 in part due to global economic concerns like the US-China trade dispute, record levels of negative-yielding debt globally and signs of manufacturing slowdowns in major economies plus.

Fear of uncertainty often drives investors to safe-haven assets, such as gold.

There are a number of ways to play the gold rally, including physical bullion, gold stocks and funds that invest in related securities.

People are asking the Big Q: Paul, is it too late to get in?

The Big A: Not with gold mining stocks.

As measured by the FTSE Gold Mines Index, gold miners are down 54% from their highs in Y 2011. Miners have been rising in Y 2019, but they would still have rise 117% to reach their former record highs. This could be attractive to some investors and I believe there is strong Northside potential.

Gold was up 20% YTD as of 30 August, but the miners were up more than 2X that at 42.94% over the same frame. Since miners’ margins are highly leveraged to the price of the metal they produce, these companies have historically appreciated alongside gold.

Looking at some of the larger gold stocks: SSR Mining (NYSE:SRM), Wheaton Precious Metals (NYSE:WMP) and Centerra Gold (OTCMKT:CADGF) all were up significantly in the last 12 months as of 30 August, but of course past performance is no guarantee of future results.

SSR Mining has operations at all stages of development in the Americas and was up 83.82%.

Wheaton Precious Metals, which is actually a royalty and streaming company, was up 67.21%.

Centerra Gold was up 118.40% on strong production results.

And of course there are several more like GOLD and NEM.

Junior miners have also seen performance far greater than that of physical gold. Wesdome Gold Mines was up 122.56%, while Lundin Gold was up 72.60%, both listed in Toronto.  

Not everyone is a gold Bull, take a look at the chart below.

When Vanguard changed the name of the fund, it coincided with a decade-long precious metals Bull run that saw gold rally from an average price of $271 oz in Y 2001 to an all-time high of more than $1,900 oz in September 2011. That is more than a 7X increase. 

And what did gold do after Vanguard stepped away in July 2018?

At the time the precious Yellow metal was trading below $1,200 oz, and many thought it had hit a bottom with another rally just around the corner. That was our call at the end of December 2018, and it happened.

Turns out that was true as gold has since rallied to $1,544 oz as of 29 August.

Have a terrific week.