Junior gold miners’ stocks have enjoyed a surge in 2019, blasting higher after gold’s first bull-market breakout seen in several years. Following a powerful summer rally, some of the Canadian miners’ stocks were really overbought, which resulted in a correction to rebalance exuberant sentiment. That grinding consolidation lower set them up nicely for their winter rally – the mining sector’s seasonally-strongest time of the year. The weekly movements of Canada's main stock index reflect that as investors await the gold stocks to amplify their next upleg.
Ahead of December, Gold headed the list of subgroups on the minus side. Eldorado Gold dumped 46 cents, or 4.3%, to $10.14, while OceanaGold got bruised 27 cents, or 10.7%, to $2.26. Gold stocks slipped on Thursday as investors digested the latest reports surrounding the U.S.-China trade war. Gold prices dropped nine dollars to $1,465.20 U.S. an ounce.
The strong seasonality of mining gold companies’ stocks comes from the fact that their price action mirrors that of their dominant primary driver, gold. Gold’s seasonality generally isn’t driven by supply fluctuations like grown commodities see because its mined supply remains relatively steady year-round. However, gold’s major seasonality is demand-driven, with global investment demand varying considerably depending on the time in the calendar year.
Deals between junior miners such as Avino Silver & Gold Mines Ltd. (asm:TSX/NYSE American)(gv6:FSE), for the sale of all of the issued and outstanding shares of Bralorne Gold Mines Ltd. ("Bralorne") to Talisker arer amongst other driving factors that saw TSX edge up this month.
Currently, gold tends to be headed towards a major winter rally driven by the sequential episodes of outsized demand. Naturally the gold stocks will trail behind gold, amplifying its gains due to their great profits leverage to the gold price. Investors are aware that even a small move in gold prices will result in tremendous gains for junior gold miners. Several Canadian miners are headed for their strongest seasonal rally of the year, driven by this annually-recurring robust winter gold demand.
The VanEck Vectors Junior Gold Miners ETF, one of the most popular small-cap mining ETF's, has gone up 50% in the last 2 months. And with expectations for interest rates falling even further into negative territory that will make gold companies irresistible for Wall Street.
Companies like Seabridge Gold Inc., Teck Resources and Turquoise Hill Resources are some of the best-diversified miners out there, with a broad portfolio of Copper, Zinc, Energy, Gold, Silver and Molybdenum assets. The exploration strategies, mine location, free cash flow and a lower volatility outlook for base metals in combination with a potential U.S. - China trade war breakthrough make each of these companies a promising choice for investors.
As analysts anticipate gold climbing to $2000/oz soon and big companies continue to take over junior miners, the payout of getting in early may be colossal.