Why Did SSR Mining Stock Pop Today?
Key Points
The U.S. Federal Reserve raised interest rates to 4% for the first time in three years yesterday.
Higher interest rates make bonds more attractive than gold.
Gold prices fell yesterday, but are rising again today.
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SSR Mining (NASDAQ: SSRM) stock jumped 3.6% through 10:25 a.m. ET Thursday, reversing course from a sell-off sparked when the U.S. Federal Reserve raised interest rates yesterday for the first time in three years.
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What happened Wednesday -- and what it means for gold prices
Complaining that "inflation is too high and has been for too long," new Federal Reserve chairman Kevin Warsh said the Fed will raise its target interest rate by 0.25%. The new range, 3.75% to 4%, means mortgages are about to become more expensive, credit card interest rates will rise, and bond yields will go up.
Savers now have slightly more incentive to put money in bonds and bank accounts (which pay interest) than invest in gold (which does not). Gold sold off yesterday, falling to $4,333 per ounce -- its lowest price in a month. It's bouncing back this morning, up 0.3% to just over $4,401 an ounce.
What's next for SSR Mining stock
Where will gold prices go next? I wish I knew! Logically, with interest rates rising this week and likely to keep rising at future Fed meetings (to combat inflation), gold prices should probably resume falling. That's not happening today, however, and it might not happen tomorrow, either.
Rather than try to predict where gold is going next, SSR Mining investors are better off deciding whether SSR stock is worth buying.
How do you do that? SSR Mining stock is one of the cheaper gold stocks, costing only 13.2 times trailing earnings. Unfortunately, analysts polled by S&P Global Market Intelligence see little prospect for further improvement, forecasting barely 1% annual earnings growth over the next five years.
Assuming this forecast is correct, and unless something changes, SSR Mining stock is probably played out for now.
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Rich Smith has positions in SSR Mining. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
