In a week where the gold price tested new highs and showed itself capable of holding above US $1,400 an ounce, speculation moved to what effect this will have on junior mining stocks. Financial Adviser magazine singled out gold-focused exchange traded funds as the best performers so far.
Top of the monthly list was iShares MSCI Global Gold Miners ETF (NASDAQ: RING) with a return of 24.2% during the four-week period. This fund tracks a global index comprising 35 holdings, mostly in Canada, the US, South Africa and Australia.
Close behind were Sprott Gold Miners ETF (NYSE: SGDM), and Sprott Junior Gold Miners ETF (NYSE: SGDJ). The latter holds a basket of 34 junior gold stocks and is heavy on Canadian junior gold miners. VanEck Vectors Gold Miners ETF (NYSE: GDX) also boasted monthly returns of over 20%.
Joseph Foster, a portfolio manager who oversees the gold investment team at VanEck, said: “When looking at gold bullion versus gold equities, if you have a positive outlook on gold you’re better off in the equities.”
Naturally, there was no shortage of opinions in the news as to which way gold is going next, with the average commentator sounding notably more positive now that prices have actually moved higher. Analysts at Morgan Stanley said that they are looking for prices to average at $1,435 an ounce during the second half of the year, while Standard Chartered predicted a correction lower in the short term due to speculative positions but nevertheless sees prices rising to an average of $1,450 an ounce in the fourth quarter.
“Gold prices have rallied to test levels last seen six years ago, and we believe the combination of dovish central banks, continued trade tensions, falling yields, geopolitical tensions and central-bank buying poses further upside risk to prices,” Standard Chartered said.
At the business end of gold mining, however, the change is as yet only marginal. Analysis of monthly gold exploration trends by Mining.com found that drilling recovered only slightly in May from a slump seen in previous months. Canada returned to its gold exploration leadership position in terms of a number of projects drilled (39), followed by Australia (34) and South America (18).
Among the Canadian junior gold stocks, Pure Gold Mining (TSX-V: PGM) made headlines as it raised C$32.5M in a bought deal financing. The company is focussed on advancing the Madsen Red Lake Gold Project in Ontario to become Canada’s next major gold mine, with the money going a long way towards making the potential one-million-ounce site operational.
Pure Gold earned extra kudos in the eyes of small investors because most of the shares in this financing were snapped up by mining money guru Eric Sprott.
In other mining stock news, shares in uranium diggers Energy Fuels (TSX: EFR) and Ur-Energy (TSX: URE) moved higher following a report on Bloomberg that the US Department of Commerce is preparing to endorse protectionist measures on domestic uranium mining.
With just 2% of uranium used by US nuclear power plants now coming from domestic mines, officers are said to be in favour of a sliding quota system that will bring US uranium mining back to life. Starting with a minimum 5% domestic requirement, the quota could escalate by 5 percentage points a year, according to ‘sources’.
President Donald Trump has until July 15 to make a decision on the recommendations.