KGC - Are Gold Stocks Safe Right Now?
Gold Prices Steady Ahead Economic Data
We are truly in unprecedented times right now. The coronavirus has put a stranglehold on the global economy and a spotlight on gold. But are gold stocks safe eright now? This is a good question to ask especially right now.
We’ve got a low rate environment, treasury yields are at record lows themselves, and the Federal Reserve an enacted unlimited quantitative easing in the short term. The only thing left is to see the U.S. dollar decline and that could be coming according to some analysts. The current government stimulus bill that was recently passed will see $2 trillion flood the market in cold, hard cash. The dilutive nature of this move could devalue things like the USD.
[Special Report] A Big Money Bet On Junior Gold Stocks
On top of this, the stock market’s pricing for gold may not be exactly what the real market is yielding right now. What do I mean by this? The physical price and supply of gold is showing a very different picture of the gold market. In our article, “Is Gold A Ticking Time Bomb Right Now?” we discussed this exact point. In an article on MarketWatch, Josh Strauss, partner at money manager Pekin Hardy Strauss in Chicago gave his take. He said, “There’s no gold. There’s roughly a 10% premium to purchase physical gold for delivery. Usually, it’s like 2%. I can buy a one-ounce American Eagle for $1,800; $1,800!”
Time To Buy A Gold Stock Or Two?
This begs the question, is now the best time to buy gold stocks? Well, it all depends on the time-frame. If you’re looking to trade gold stocks, you’ll be keener to pay attention to technical indicators. For instance, Barrick gold stock (GOLD-Free Report) has traded along its 50DMA for the last 6 sessions including March 31st. While this sideways trend could suggest a stronger level of support at the current price, it may not be enough to attract a day trader’s mentality.
However, if you look at other names like Kinross gold stock (KGC-Free Report), you’ll see that it has simply bee in an uptrend but is still far from any major moving average. Typically, if you look at historic moves in gold, smaller gold stocks tend to move higher and faster than majors. In the case of Kinross, shares have rallied by more than 40% since March 16. That was the date that most gold stocks dropped. In contrast to Barrick gold stock, Kinross could be more suited for a trader’s mentality as it fluctuates more significantly on a short-term basis.
Similarly, you could also look to B2Gold (BTG-Free Report). We discussed this stock earlier this week as shares reached a previous support level around $3. On March 31, the gold stock managed to climb back about 10%. This came after B2Gold reported that it had resumed mining operations at its mines in the Phillippines. It also continued milling operations at its Fekola and Otjikoto mines in Mali and Namibia.
[Special Report] A Big Money Bet On Junior Gold Stocks
Coronavirus Impact On Gold Stocks?
Does the coronavirus have an impact on gold stocks? It definitely does but unlike the economic slowdown resulting in a negative for certain stocks, a slowdown for gold production along with the limited supply already at work could further lift prices in the long run. This is based on simple supply/demand metrics. Higher supply and lower demand generally equate to higher prices in the market.
Read More
- Did The Greenback Just Give A Green Light To Gold Stocks?
- Are Gold Stocks Like Barrick Poised To Bounce This Week?
- Is Barrick Gold Stock Still Undervalued At This Price?
So will it be open-season for gold stocks? That is yet to be seen right now. We still need to see certain things factor in. The US dollar will certainly be one of these factors. Meanwhile, we’ve got some longer-term indications that could become potential catalysts down the road. Not many have brought up the idea of “stagflation” yet. Sure, we’ve focused on the Fed Funds rate but what about when all of this is over and the economy gets back to work?
We could have a situation that sees a period of inflation while the economy itself is either stagnant or slightly declining. Considering the fact that the Federal Reserve has also fired a bunch of big bullets already, will it still be able to fight against this type of scenario? All good things to know. For the time being, coronavirus cases continue to climb, the U.S. government is torn on an exact date to get back to work, and the economic figures for unemployment and payrolls are set to come out soon. Given this as the case, it might be time to start putting gold stocks on your list in April.