Finally, Some Good-Looking Gold/Silver Miner Charts
Can't wait for those those big Q2 earnings reports
Long-suffering mining investors have been wondering how high gold and silver would have to go to finally breathe some life into their portfolios.
It looks like $2300/oz gold and $27/oz silver have done the trick. Behold the (suddenly very pretty) price charts:
Higher Metals Prices = Wider Profit Margins
These price moves aren’t a response to miners’ recent earnings reports, which are still mostly mediocre. They’re anticipating what the next batch of results will look like if today’s metals prices hold up.
Mining is a highly leveraged business. That is, costs are partially fixed, so higher gold/silver prices go straight to the bottom line. And every day the metals hold their current levels — or, like today, rise another percent or two — the conviction among investors that mine profitability is about to jump grows stronger.
This is great news, but not a reason for giving in to FOMO (fear of missing out). The broader markets are fragile, with overvalued tech and financial stocks colliding with “higher for longer” interest rates, risking a sudden trend reversal.
So enjoy these relatively good times, but stick with your dollar-cost-averaging. Buy the stocks listed in our portfolio a little at a time, and be ready to take advantage of sharp pullbacks.
It is apt that the first two firms shown are AEM and PAAS. They teamed up to purchase Yamana Gold in Nov 2022, keeping the five mines of this substantial Toronto firm under Canadian ownership, outbidding the S. African firm Gold Fields. AEM is the most profitable large firm in the business. As the price of gold rises, this will bolster the fiscal health of incumbent mining firms. GDX is the best known US ETF for high market cap precious metal sector firms. The web site for Van Eck discloses the miners within its GDX portfolio.
All incumbent precious metal miners gain from rising prices for their products, not just the big boys. The least profitable firms can be helped the most. The market cap for a firm in New South Wales has soared more than 300 percent during 2024, because investors must hope it can survive owing to increasing profit margins.
During the months ahead, watch for stock prices of exploratory firms that do not increase in value, despite the more favorable pricing. Most explorers fail and go out of business. Good to winnow out losers.
Thank you John for the nice summary of today's crossing of a critical threshold. You analysis is appreciated and your suggestion to "dollar costs average" makes complete sense! -Chris