Precious Metal Miners, is Now a Great Opportunity?

11th Oct '24 by Jack Corsellis

16 comments 731 reads

VanEck Gold Miners ETF (PCQ:GDX) one of the main gold miner ETFs on the weekly chart finding support around its 10-week Simple Period Moving Average (SMA) which is closely aligned with the 50-day SMA. Volume is also running below the 30-week average line on the pullback which is a constructive sign indicating a lack of heavy selling.

Around 10-week SMAs is a time to watch for potential institutional support.

Global X Silver Miners ETF (PCQ:SIL) the main silver miner ETF I monitor has the potential for a multi-month consolidation. Price action has tightened on the weekly chart in recent weeks above its 10-week SMA and volume drying up vs the 30-week average.

Below highlights several of what I think are the current precious metal mining leaders from a fundamental and technical perspective.

Large caps: Newmont (NYQ:NEM) & Barrick Gold (NYQ:GOLD)

Junior gold miners: Kinross Gold (NYQ:KGC) Alamos Gold (NYQ:AGI)

Silver miners: Hecla Mining Co (NYQ:HL) & Pan American Silver (NYQ:PAAS)

Note on the weekly charts below the supportive action around the 10-week SMA.

Below is analysis from ChatGPT on gold, silver, and precious metal miners:

Detailed Analysis of Gold and Silver: Fundamentals and Miners' Share Price Appreciation

Gold and silver, as precious metals, have historically been seen as safe-haven assets, stores of value, and hedges against economic uncertainty. Their performance is influenced by a combination of macroeconomic factors, including inflation, interest rates, currency dynamics, and geopolitical risks. In this analysis, we’ll explore the fundamental reasons why gold and silver may continue to perform well and how this could translate into share price appreciation for precious metal miners.

1. Macro-Economic Factors Supporting Gold and Silver Prices

a) Inflation and Currency Debasement

One of the primary drivers of gold and silver prices is inflation. Both metals have historically served as hedges against inflation because their intrinsic value tends to rise when fiat currencies lose purchasing power. In a period of inflation, investors often flock to gold and silver to protect their wealth from the declining value of paper currencies.

Persistent Inflationary Pressures: Post-pandemic stimulus measures, supply chain disruptions, and increasing wage…

Unlock with Email

Unlock with Google

Already have an account?
Login here

Jack Corsellis

21st Oct '24

Good action in VanEck Gold Miners ETF (PCQ:GDX) and Global X Silver Miners ETF (PCQ:SIL) following their strong bounces off of 10-week Simple Moving Averages since I posted about them setting up. These strong reversals off of key moving averages I call Shakeout Demand Tails (SDTs).

I got some of the moves in Newmont (NYQ:NEM, Kinross Gold (NYQ:KGC, First Majestic Silver (NYQ:AG) and Hecla Mining Co (NYQ:HL) .

Shakeout Demand Tails (SDTs) are one of my favourite swing trading setups. I cover them in one of my recent YouTube Videos:

Alphaflight

I posted the below on another thread here...

From Alasdair Macleod at GoldMoney:

"This is the long-awaited BRICS summit, ahead of which there has been mounting speculation that led by China and Russia a new gold-backed trade settlement medium will be on the agenda. The issue is probably becoming more urgent, given a combination of heightened risks for the dollar which is noticeably sliding into a debt trap, an official policy of marginalising the dollar in both BRICS and Shanghai Cooperation Organisation trade, and now a need to protect roubles and yuan from a dollar fallout."

Note that the Kazan meeting starts tomorrow.

If BRICs do announce that their payment system will be backed by gold (looks quite likely) then that would be a paradigm change akin to Bretton woods...

Source

ken mitchell

Again as happens so often there’s a well intentioned article asking if NOW is a great opportunity to buy? This time it’s Precious Metals Miners.

How can NOW be the time to buy when Gold Mining shares have soared this year? Surely the NOW opportunity was ahead of the following share price gains and not after them?

Resolute Mining (LON:RSG) is up 90% year to date and 136% over 1 year.

Pan African Resources (LON:PAF) is up 123% and 138%.

Hochschild Mining (LON:HOC) is up130% and 170%.

Serabi Gold (LON:SRB) is up 98% and 140%

Centamin (LON:CEY) is up 72% and 118%.

This happens SO often.

E.g I bought Marks and Spencer (LON:MKS) at £1.02 ahead of the share nearly quadrupling. When I bought so many commentators were advising investors to stay away. But now that the share has quadrupled so there are those “Is NOW the time to buy Marks and Spencer (LON:MKS) articles?” And the conclusion each time is “yes it is.” Is it? Or WAS it when the share was £1 and even lower?

I missed out on the gold shares boom because I don’t follow gold shares closely, and it took a reminder in a post from g m trader on the Mining thread here today to wake me up to what I had missed. Here’s the link for that general Mining thread:-

https://www.stockopedia.com/co...

But using my preferred tactic of buying when most are saying sell and selling after big rallies, I won’t be buying any gold share now. It might or might not be near to the peak in the gold price. Surely the risk is much higher after such a big rally than it was when the bad news looked priced in?

I.e I’m not saying this gold rally can’t continue ((I don’t follow enough to give any opinion on that) but I’m certain that NOW, and after such huge short term share price gains, is not THE time to buy.

SCI20

Edmund Shing has for some time highlighted the bull case for gold, silver and uranium. His posts are always informative, balanced and worthy of note. I hold Serabi Gold (LON:SRB) , Ishares Physical Metals (LON:ISLN) and Centrus Energy (ASQ:LEU. Thank you Edmund.

gmtrader

Very good point Ken. I think that you will find that miners overall though have not rerated yet. They are still on very low valuations historically. And with the gold price so high they are now starting to make huge profits and this is only now starting to show on their results and so have been pretty much under the radar so far.
what people really need to look at and decide is whether the price of gold with hold up, go down or even continue to climb higher. So many factors will influence the price as noted by Jack’s opening post from chatgp.
So if the price of gold stays at this level then the miners will continue to make record profits in the like never seen before by the miners. if the price rises then that makes the miners even cheaper in value. And ofc, if the price of gold now drops, well the miners will drop in share price.
So just because some of the miners have done well, does not mean a bull run will not happen. The miners are due a bull run, and there are many factors to suggest one may be on the cusp. Ofc this is a riskier sector than most so as you pointed out, caveat emptor.

Did you not see the date of the original post, Oct 11th? It was a wonderful time to buy! Now many precious metal miners are short-term extended.

My point was just about that key word NOW.

I was not suggesting that the rally might be nearly over, and just that imo it would have been much better buying gold Miners ahead of the shares more than doubling rather than investing NOW after those gains, being the time to start.

Apologies Jack. I’ve just looked at your “activity” to see that you were posting on gold and gold shares months ago. So you called it very well and more fool me for ignoring gold posts.

22nd Oct '24

No worries. The strength of precious metal miners in the face of a strong US Dollar (DXY proxy) has been impressive. Once the wrecking ball for precious metal that is the US Dollar begins a downtrend, we could see further opportunities develop. With precious metal miners, my experience is their 21d EMA and/or 50d SMA is often a sweet spot when they are showing relative strength vs the major US indexes.

Having now read your article properly I would have shown more annoyance at my reply to it than you did. It’s such a well researched article/post but I’m not looking to trade these days and have a portfolio I’m largely happy with and with no wish to get in to shares and sectors I don’t understand well. Hence my not reading it properly until today.

What is such a shame (and presumably there’s no easy answer) is that threads like yours see so few replies and hardly any recommendations. Just 11 recs for your efforts, when the daily small cap thread can get 30 or more before anything has been posted by Paul or Graham there!

There is fortunately a fairly successful Invrstment Trust thread and these days Investment Trusts are my main focus, along with quality big dividend paying shares like Aviva (LON:AV.) and big dividend paying Investment Trusts on undeserved big discounts, along with a Mining sector portfolio that doesn’t include gold.

The latest PM report from Sprott Inc:

Key Takeaways

Price Action Since the End of Q3: As of this publishing date and since September 30, both gold and silver have pushed above important thresholds to reach $2,700 per ounce and $34 per ounce, respectively.
Gold and Silver Prices Soared in Q3: Both metals saw significant price increases in Q3 2024, with gold posting its largest quarterly percentage change since Q1 2016 and the largest U.S. dollar increase in history. Silver prices also rose, but with more volatility than gold. YTD through September 30, gold is up 27.71% and silver has gained 30.95%.
Central Bank Buying Likely Behind Gold Surge: We believe central banks, particularly emerging markets, were the major driver behind the gold price increase.
Gold Enters New Bull Market Regime: In our view, gold has entered a new bullish phase driven by factors like central bank buying, rising U.S. debt and a potential peak in the U.S. dollar.
Macroeconomic Drivers and Geopolitical Risks Influence Prices: Inflation, falling interest rates, and geopolitical instability are all seen as factors influencing gold and silver prices.
Silver's Dual Role: Silver's price is driven by both its value as a precious metal and its increasing demand in industrial applications like renewable energy.

Source Sprott Inc

Great chart. Highlights the 10+ year Cup with Handle formation for gold too.

DavidMcCabe

Hi Jack

I have been meaning to post on this since it went up, to thank Jack for putting in the effort to create such a well researched and presented article. I wish I could contribute more, but I have to focus on my day job at the moment, as that is what pays the bills!

I cannot add anything to the overall analysis, but I wanted to highlight one particular stock, Serabi Gold (LON:SRB) , as it has rocketed in price, so investers may believe they have missed the boat, but it is an unusual share that has actually got better value, even whilst getting more expensive.

Share price (pence) on Jan 2nd was 46.8, 2023 EPS was 8.74 cents or 6.9p (exchange rate of 1.2731) giving a P/E of 6.8. This sound reasonable for a Brazilian gold miner, or at least not pricey

Current share price is twice this now, but EPS for this year is expected to be 37.8, i.e four times higher, and hence a P/E of 3.21. Barring disasters, this should happen, as nine months production and cost/price is a known quantity already.

What is even better is that the P/E for next year, is forecast at just 1.82.

What is happening here is a lot more than just a play on the gold price rising.

1) Production is up as a second mine is coming on stream, and new equipment is being introduced to increase efficiency.

2) Increasing production is also reducing the AISC so that margin would increase even if the gold price stays static.

If you look at what I believe their credible plans are for increasing production to 60000 ounces a year in a couple of years, with increased margin, then this still looks very cheap to me. They also have no debt.

Caveats:

This is my third largest position so obviously I am positive about this and probably suffer from some bias.

It is a small gold miner in Brazil, with all the attendant risks.

Having said all that, if you are an invester that considers companies like this, I would suggest that the risk reward ratio is interesting. The company has some very good presentations available, so you can dig into the detail yourselves.

David

Yes indeed Jack. Some of the big names (Barrick Gold (TSE:ABX) , Newmont (NYQ:NEM) and even Franco-Nevada (NYQ:FNV) ) have yet move much. We are just getting started in my opinion.

23rd Oct '24

Yes could be early in a multi-year move like the commodity bull market from 2003 - 2007. Precious metal miners highest on my radar and I'm currently long several include large caps Newmont (NYQ:NEM) Barrick Gold (NYQ:GOLD) Wheaton Precious Metals (NYQ:WPM) Agnico Eagle Mines (Ontario) (NYQ:AEM) juniors Kinross Gold (NYQ:KGC) Alamos Gold (NYQ:AGI) Eldorado Gold (NYQ:EGO) and silver miners Hecla Mining Co (NYQ:HL) Pan American Silver (NYQ:PAAS) First Majestic Silver (NYQ:AG) Coeur Mining (NYQ:CDE) . Like with every stock, there's a time to be involved and every other time!

Newmont (NYQ:NEM) reports after today's close. In my view it's the current institutional leader, so it'll be interesting how it reacts and positively or negatively effects the wider group.

Hi Jack,

This is exactly my thinking too, commodities are historically cheap. We are (in my opinion) entering a period of stagflation. Real rates will remain negative which will be great for gold. All of the companies you mention will capture the market beta moves I believe, that's all you have to do in with a gold bull run...

I like Serabi Gold (LON:SRB) mentioned by DavidMcCabe, it is super cheap with great metrics. Companies like Serabi Gold (LON:SRB) look like a call option on gold to me without the time decay components. Most of these cheap gold and silver miners are to be found on the Canadian market, not the LSE of course.

Franco-Nevada (TSE:FNV) invented the royalty model on PMs, it still looks cheap to me (because they got hammered due to the first quantum debacle). Franco-Nevada (TSE:FNV) is the highest quality PM play out there to quote Rick Rule. Also Sandstorm Gold (TSE:SSL) is likely to shift soon. The royalty companies are the safest way to sit in the PM market and ride out the bumps, the mining companies are much more volatile, however I own both sub-sectors.

Precious Metal Miners, is Now a Great Opportunity?

Detailed Analysis of Gold and Silver: Fundamentals and Miners' Share Price Appreciation

1. Macro-Economic Factors Supporting Gold and Silver Prices

a) Inflation and Currency Debasement

Unlock the rest of this article with a 14 day trial

About the Author

Jack Corsellis

16 comments

Key Takeaways

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...