Company Overview and News
Most precious metal mining stocks have fallen over the last few months due to falling gold prices. The US dollar’s revival has also impacted precious metals and mining stocks recently.
Although the markets have their own logic, highly capitalized gold-mining companies seemingly should belong on any “stocks to buy” list. Thanks to rising geopolitical tensions and soaring trading sentiment, many folks seek safe-haven assets. While gold stocks seemingly offer a viable solution, their overall performance has been unusually disappointing.
US ten-year Treasury note yields (IEF) hit a high mark of approximately 3.1% today—a record since July 2011. Yesterday was also an up-day for US yields. The two-year Treasury note yield (SHY)(GOVT) hit a new multiyear high of approximately 2.6%—its highest level since August 11, 2008.
Precious metal mining companies usually follow precious metals. Precious metals seem to be in the doldrums lately over the strength in the US dollar and the potential movement of US interest rates. The recent slump in demand for haven assets has also affected mining stocks.
Royalty and streaming mining companies (RING)(SIL) have business models that are considered quite conservative because they don’t own mines. These companies have somewhat fixed income streams after making upfront payments for production rights to mines. This could be why this group of miners has seen higher valuation multiples than miners in other categories.
Besides the rise and fall in the US dollar, another crucial factor affecting precious metals price changes is overall market volatility. Recently, when the United States withdrew from the Iran nuclear deal, the markets seemed to breathe a sigh of relief. Also, the geopolitical issues in the Korean Peninsula seem to have subsided. We also saw North Korea free three American detainees just ahead of talks between President Donald Trump and Kim Jong Un.
In April, the market’s unrest had a significant effect on precious metals and miners, leading to increased prices. The US dollar has strengthened recently, which had a negative impact on precious metals and mining stocks. The settling of the market unrest could have also caused a withdrawal of haven bids.
RBC Capital Markets has made a case for owning gold and gold stocks (GDX) to hedge against market volatility. The firm mentions, “Gold has emerged as a short-term hedge against this volatility and we recommend investors add gold exposure especially with the equity valuations at multi-year lows. We maintain our flat $1,300 per ounce gold and $17.50 per ounce silver assumptions while marking to market for the first quarter of 2018.
In this final part of the series, we’ll look at the correlation between gold and four mining stocks: B2Gold (BTG), Royal Gold (RGLD), New Gold (NGD), and Newmont Mining (NEM). For the most part, mining stocks move with gold prices. Among these four miners, Newmont has shown the highest correlation with gold this year, while B2Gold has the lowest correlation year-to-date.
The two-day April meeting of the Federal Reserve had the expected outcome, and the FOMC members refrained from raising the interest rates any further. The Fed members highlighted that inflation has moved closer to its 2.0% target. They added that “on a 12-month basis is expected to run near the (policy-setting) Committee’s symmetric 2 percent objective over the medium term.”
Good day. And welcome to the Royal Gold Fiscal 2018 Third Quarter Conference Call. All participants will be in listen-only mode [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions [Operator Instructions]. Please note this event is being recorded.
Usually, precious metals miners’ shares follow movements in precious metals. Precious metals have risen over the past few days, supporting mining companies.
This news release contains forward-looking information that is subject to the risk factors and assumptions set out under “Caution Regarding Forward-looking Information”. It should be read in conjunction with the Company’s unaudited interim condensed consolidated financial statements and the notes thereto for the three months ended March 31, 2018. The consolidated financial statements of Centerra Gold Inc.
The equity markets have also had a significant impact on precious metals historically. Though the relationship between these two is not very precise, there can be an inverse relationship over the longer term. Asian stocks were down on Wednesday, and global equities had a fifth straight session of declines. This time it seems that gold is taking cues from the stock market rather than moving against it.
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