Why Gold and Silver Stocks Zoomed in Today

What happened

Precious metals stocks shone on Thursday, with several gold and silver stocks jumping double-digit percentages by midday. Here’s how much the sector’s best-performing stocks rallied to their highest trading levels today at 2 p.m. ET:

  • Fortuna Silver Mines (FSM 10.39%): up 13%.
  • Heart Mine (CRC 9.52%): up 11.6%.
  • iamgold (IAG 9.62%): up 11.1%.
  • Endeavor Silver (EXK 9.14%): up 10%.

Let’s thank the latest economic data for today’s surge in these stocks.

So what

As is usually the case with commodity stocks, the prices of the underlying commodities are the main factor that drives stocks up or down.

Gold and silver prices rebounded on Thursday and posted strong midday gains – gold was up around 1.4%, while silver traded around 2.3% moreover.

These gains may seem insignificant at first glance, but they are not once you put them into the context of what drives prices up.

For example, gold at the start of the week plunged to levels not seen since February. The situation was worse for silver: prices fell to nearly two-year lows on May 13.

Today’s rebound in gold and silver prices is therefore significant, which also explains why stocks in the sector soared today.

Image source: Getty Images.

Housing starts fell in April and mortgage rates are gradually rising alongside Federal Reserve interest rate hikes in the wake of skyrocketing inflation. Meanwhile, jobless claims in the United States last week hit their highest level since January.

This disappointing economic data released today has been the main driver for gold and silver prices as it raises concerns about the economy’s growth trajectory. Stock markets are already bearing the brunt of these fears, with major corporations also posting dismal quarterly numbers amid inflationary pressures.

When stocks fall and worries about the health of the economy weigh heavily, investors flee to safe-haven assets like gold and silver, helping to drive up precious metal prices. Precious metals are considered a hedge against inflation and economic uncertainty. The latest housing and jobs data, combined with rising inflation and weak corporate earnings, combine to create a perfectly supportive environment for precious metals like gold. And as gold and silver prices rise, so do the stock prices of companies that trade gold and silver.

While Canada-based Iamgold is a pure gold company and Endeavor Silver a pure silver company, Coeur Mining and Fortuna Silver own both silver and gold mines.

Now what

The correlation between gold and silver and the prices of these stocks is unequivocal, as shown in the chart below. You can see how each of these stocks fell after mid-April as gold and silver prices cooled. So it’s no surprise to see these stocks rebound today on firmer precious metal prices.

In fact, after today’s rally, shares of Endeavor Silver, Coeur Mining, Fortuna Silver and Iamgold are each up double digits so far this week. Obviously the market is pushing these stocks higher in anticipation of a rebound in gold and silver prices, but you might want to be cautious and pick your stocks carefully after weighing on the fundamentals. .

EXK Chart

EXK given by Y-Charts

To give you an example of the stocks listed in this article, Iamgold may have beaten first-quarter revenue and earnings estimates earlier this month, but the miner also expects significantly higher capital spending. high on its Côté Gold project in Ontario due to inflation. In management’s own words, this poses “significant short- and medium-term challenges” for the company.

Endeavor Silver, on the other hand, not only surprised the market with strong Q1 numbers last week, but also gave insight into its growth plans for Q2. The silver stock jumped more than 20% after the earnings.

The point I’m trying to drive home is that you may see days like today more often now given the uncertain macro environment, but if rising precious metals prices may entice investors to buy gold stocks ‘gold and silver, that shouldn’t be the case onlyor even the main reason for your investment.