In a brutal day for most stocks, gold and precious metals mining stocks are getting hit particularly hard. The following group of precious metals miners in particular are seeing their stocks fall sharply:
|Stock Name||Price Change*|
|Coeur Mining (NYSE: CDE)||(12%)|
|First Majestic Silver (NYSE: AG)||(10%)|
|Fortuna Silver (NYSE: FSM)||(11.9%)|
|Galiano Gold (NYSEMKT: GAU)||(9.3%)|
|Hecla Mining (NYSE: HL)||(9.3%)|
|Northern Dynasty Minerals (NYSEMKT: NAK)||(8.1%)|
|Silvercorp Metals (NYSEMKT: SVM)||(11.8%)|
At this writing, the S&P 500 (SNPINDEX: ^GSPC) is down more than 3% and every sector of stocks is down. Gold prices are down almost 2%, crude oil prices have plummeted more than 5%, and investors are moving aggressively out of equities and speculative investments today. The likely reason is the spiking cases of COVID-19 in the U.S. and abroad, as we head into the U.S. election next week and elected officials put off any fiscal stimulus until after the election.
Simply put, investors tend to react to fear and greed, and right now fear has its hands solidly on the reins. People are getting sick, the economy is at serious risk of a "double-dip" recession without any action from the federal government, and with the election less than a week away, Congress and the White House are not going to act before then.
Ironically, the kind of uncertainty above is usually good for gold prices, and consequently for gold and precious metals miners, as investors look to gold as both a short-term hedge against downside in stocks during economic weakness and as a speculative opportunity to profit as traders and speculators rush into gold as a "hard asset."
And so far this year, that's proven to be a boon for some of the miners above. Since the beginning of the year, gold prices have gained about 25%, and all of the miners above, except First Majestic Silver and Coeur Mining, have outperformed the S&P 500 in 2020.
Does that make today a "buy on the dip" opportunity for these mining stocks? Maybe, but with the caveat that next week will bring something that investors, and the stock market as a whole, craves: certainty. The outcome of the U.S. election -- no matter who wins -- is generally followed by a period of stocks moving higher in the weeks and even months after. And that certainty alone could mean a trade on gold stocks based on a short-term gain could backfire.
The biggest takeaway: Gold stocks and precious metals miners in general are no sure thing, particularly as short-term bets. Instead of taking on the unnecessary risk of a short-term trade, make sure you understand the fundamentals that underpin a company's ability to make a profit. Over the long term, stocks have proven the best way for people to grow their wealth. But when treated as a tool for short-term trading, the results aren't often so good.
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