Volatility continued this week as gold and silver consolidate. Early Thursday, Fed chairman Powell, essentially said that the U.S. would allow for considerably higher consumer price inflation rates for longer period of time. We will get consumer price inflation at some point in the near future but this time around the U.S. isn’t structurally sound enough to pull another Paul Volcker. These words from the chairman should have helped the metals, though this is more of the same from Powell of late, and might have already been priced in. Mining equities also continue to be very volatile, which has and should continue provide opportunities (for a bit longer at least).
It is important to understand, especially those investors who are newer to the sector that even if gold and silver prices drop a bit to say $1,800/oz and $23/oz., the mining equities will still go up as the implied old and silver prices in the valuations of many mining stocks are $1,675-$1,750/oz. and $20-$21/oz. I’m still of the belief that gold and silver prices could correct further, looking for gold to go as low as $1,825-$1,860/oz. and silver to $20-$22/oz. before we begin the next leg higher, although this would have to happen sooner rather than later just because there are so many potential catalysts for the precious metals. At this point, the biggest risk to the miners Is on the upside so it’s best that most are near fully invested (>75%).
For the second consecutive week, it was mostly a quiet week in mining. Given the much-improved equity markets, though still quite undervalued, there continues to be more equity raises, especially among juniors, just not to the degree in which we saw financings over the last three to four weeks.
$ARTG.V, $BRC.V, $CGC.V, $F.V, $KNT.V, $MKO.V, $MTA, $NAK, $NSR.TO, $SBB.TO, $SILV, $SLV.CN, $SKE.TO, $VZLA.V
August 31, 2020