Gold, Silver, Platinum Group Metals 2019 Metal Price Predictions And Stock Choices

Article published on Seekingalpha.com
Summary

Last year with precious metals, apart from palladium, falling short of projected values, our predictions and anticipated stock gains fell well short of expectations.

For 2019, we again anticipate relatively conservative gains in precious metals prices and continuing falls in general equities and bitcoin valuations.

If our predictions are correct, we could see a further recovery in precious metals prices and a sharp upturn in relevant stocks.

We are sticking in our stock recommendations to major precious metals miners and royalty/streaming companies as they are likely to remain comfortably in existence if metal prices move against them again.

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Two gold and silver stock tables showing some of the huge gains made YTD

The two tables shown below were prepared by me for an article which has now been published  on seekingalpha.com.  (Click on link to read full article) .The article looks at the companies included in the tables, some of my investment suggestions made a year ago on seekingalpha.com and some ideas for future investment in the sector.

What the tables show is the huge price leverage which can be achieved from investing in the right gold and silver mining stocks rather than the precious metals themselves in a year like 2016 where gold and silver transitioned from being totally out of favour to being prime asset classes with institutions and investors playing catch-up.  It also shows that some stocks are still showing triple digit gains this year despite the recent falls in gold and silver prices.

Note:  The tables only cover top tier gold and silver stocks.  Selected juniors may have done even better, but others will have crashed and burned – junior mining is always a risky sector!

World Top 10 Gold Mining Companies with U.S. stock quotes (US$)

Stock Price Jan 1 Price Dec 16 Rise YTD Peak Fall from Peak
Barrick (ABX) 7.38 14.28 93.5% 23.16 38.3%
Newmont (NEM) 17.99 31.66 76.0% 45.86 31.0%
Anglogold (AU) 7.10 9.51 33.9% 22.65 58.0%
Goldcorp (GG) 11.56 12.53 8.4% 20.15 37.8%
Kinross (KGC) 1.82 3.03 66.5% 5.74 47.2%
Newcrest (NCMGY) 9.47 12.37 30.6% 20.06 38.3%
Gold Fields (GFI) 2.77 2.67 -3.6% 6.45 58.6%
Sibanye (SBGL) 6.09 6.61 8.5% 20.78 68.2%
Agnico Eagle (AEM) 26.28 37.34 42.1% 58.77 36.5%
Freeport (FCX)* 6.77 13.83 104.3% 16.21 14.7%

*Primary copper producer but still one of the world’s top gold miners

Source Yahoo Finance  and lawrieongold.com

Some other U.S. quoted relevant precious metals miners and indexes (US$)

Stock Price Jan 1 Price Dec 16 Rise YTD Peak Fall from Peak
Yamana (AUY) 1.86 2.64 41.9% 5.90 55.3%
Randgold (GOLD) 61.93 68.74 11.5% 125.41 45.2%
Harmony (HMY) 0.93 1.89 103.2% 4.76 60.7%
Eldorado (EGO) 2.97 2.75 -7.4% 5.07 45.8%
Coeur (CDE) 2.48 9.08 266.1% 15.96 43.1%
Hecla (HL) 1.89 5.39 185.2% 7.24 25.6%
Pan American (PAAS) 6.50 14.71 126.3% 21.46 31.5%
XAU Index 45.30 73.41 62.1% 112.83 34.9%
HUI Index 111.18 165.32 48.7% 284.14 41.8%
GDXJ Index 19.21 29.86 55.4% 51.70 42.2%

Sources: Yahoo Finance  and lawrieongold.com

 

Asia Pushing Gold Higher and Silver’s on a Roll

Trading overnight on the Shanghai Gold Exchange (SGE) served to give the gold price a boost overnight last night.  The SGE’s am benchmark fix came in at the equivalent of US$1329.05 an ounce, around $10 higher than it had been trading on Western markets the previous day, and the pm SGE benchmark price came in higher at $1.335.27 on http://www.kitco.com’s calculations – the site has a nice interactive tabulation of the SGE benchmark prices in various combinations of yuan, U.S. dollars, ounces and grams.

Whether the SGE uptick will start to show up in terms of a pick-up in Asian demand – notably in China where it appears to have been lacklustre so far this year – remains to be seen. But this could already be happening given net imports of gold into mainland China from Hong Kong (which currently accounts for around 40-50% of such imports), rose sharply in May to the highest level in five months at 115 tonnes.  If Asian demand does pick up – we will be watching mainland China gold import levels with perhaps added interest in the months ahead to see if there is a continuing improvement – and if gold ETF inflows continue at recent levels, there could well be even more of a squeeze in physical gold availability given inventories of available. non-attributable, metal in London and New York appear to be getting particularly tight.

The real precious metals beneficiary of yesterday’s gold move – indeed of gold’s overall performance over the past few weeks – has been silver, which for the first time since September 2014 has breached the $19 an ounce level.  Indeed its rise of around 6% over the past 10 days has been pretty spectacular.  This is also showing up strongly in the Gold:Silver Ratio (GSR) – effectively calculating the amount of silver it would take to ‘buy a similar weight in gold – which has come down to below 70 from a high of over 83 only around three short months ago.  silver had seemed to be relatively slow to move, but now it appears to have some momentum behind it.

As a result of silver’s increase, silver stocks – even before the latest big surge in price – had been probably the best performing stock market subsector year to date – See: Silver Stocks Best Investment YTD. Can They Continue to perform?.  But since I wrote that article only a few days ago they have, not surprisingly, continued to move sharply upwards alongside the boost in the silver price.  From the UK investor’s point of view, most of these major silver stocks are quoted in Toronto (TSX) and the USA (NYSE or NASDAQ) – the only major primary silver producers with UK quotes are Fresnillo (FRES) and Hochschild (HOC).  FRES is up 142% year to date and HOC 178%.  Another more diversified approach would be the Way Charteris Gold and Precious Metals Fund where silver stocks comprise a large part of its major investments.  After a pretty torrid performance over the past few years, this year to date it is up around 154% from the beginning of January.  These are impressive performances, but as usual with silver, while the upside potential is really positive, the downside risks are similarly large.  Silver tends to outperform gold when the latter is rising, but can substantially underperform on the downside.

Silver too, as a very small market sector in monetary investment terms, is also seen as being particularly prone to potential manipulation on the futures markets by a number of silver analysts and by virtually the whole community of out and out silver bulls.  They will point to a number of occasions, and particularly April 2011, when silver was on a roll and reached just short of $50 an ounce, where huge seemingly anomalous sales on the futures markets saw it crash – even when gold at the time was  to continue on an upwards path for another 4 months.

Both silver and gold have benefited quite strongly from the shock UK Brexit referendum outcome which has had some strange effects on markets in general.  Gold, and silver, have benefited, while the pound sterling has plunged, but the UK’s well-followed FTSE 100 Index, after a  stutter, recovered all its lost ground, and more.  It is currently up 5% on the past month at a new high for the year to date.  Few would have predicted that kind of outcome from a vote for the UK to leave the safety net of the EU.

But as cautioned, silver is a volatile metal to trade, and silver stocks perhaps even more so.  If gold continues to show some strength, there’s a good chance silver’s momentum could carry it yet higher still with the GSR continuing to come down.  If gold were to reach $1,400 or higher by the year end – as many analysts are now suggesting – silver and silver stocks could well be somewhere to put perhaps a limited section of your investment portfolio, but only a true gambler would risk all!

 

Silver and Silver Stocks have been Making Strong Move

Silver has performed better than gold post Brexit.  Gold rallied around $100 as soon as it became apparent that The UK’s referendum vote was going in the Leave direction, but has since come back to levels it had actually already achieved a week or so earlier.  However silver has surged ahead with the Gold:Silver Ratio (GSR) coming down to around 71.75 as I write from levels above 74 pre-Brexit.  Indeed the silver price has achieved a level which it last saw back in early 2015 – and then only briefly.

Do read my commentary on the silver price posted on sharpspixley.com – See: Silver surges. Will it be allowed to continue upwards?.  the recent surge in price  is something that has seemed to be ignored by the media.

If you are interested in silver stocks – the best performing investment subsector so far this year, do read also my article published on seekingalpha.com – Silver Stocks Best Investment YTD. Can They Continue to Outperform.