Gold Mining Stocks Video 18.05.21.
Low Interest Rates And Inflation Fears Provide Strong Support To Gold Mining Stocks
Gold mining stocks pulled back a bit after yesterday’s upside move as gold failed to gain more upside momentum after a successful test of the resistance at $1865.
However, these stocks remain close to yearly highs and may have a good opportunity to gain additional upside momentum in case the price of gold manages to stay above the $1850 level.
It should be noted that many gold mining stocks had a challenging start of the year as gold price declined and traders were focused on other market segments in search of growth.
However, the situation is changing since gold price managed to get from the lows near $1675 in March to the recent highs at $1875. Continued strong support from the Fed and rising inflation provide a solid setup for further upside for both gold and gold mining stocks.
What’s Next For Gold Mining Stocks?
Traders have already provided strong support to shares of Newmont Corporation which is up by about 25% year-to-date. The performance of Barrick Gold, Agnico Eagle Mines and Kinross Gold is more modest, but traders may use these stocks (and other similar gold mining stocks) as a catch-up play in case gold rally continues.
Valuations of gold mining stocks look low compared to many market segments. Even after the recent rally, Newmont Corporation is trading at less than 20 forward P/E. Barrick Gold’s valuation is about the same, while Kinross Gold is trading at just 9 forward P/E.
It should be noted that gold mining stocks typically provide traders with leverage to the price of gold. This is a double-edged sword since shares of gold mining stocks will likely drop more than the price of gold when the gold market is in a downside trend. However, gold mining stocks tend to significantly outperform gold when the market is bullish.
This phenomenon is already visible this year as gold is yet to get to the levels that were seen at the start of this year while gold mining stocks are moving higher. With some help from the price of gold, the current upside move in gold mining stocks will continue.
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