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Despite the recent surge in precious metals, the gold and silver mining stocks haven’t been breaking out to new highs. Undoubtedly, the chart of gold looks nothing like the many miners who unearth the shiny yellow metal. Indeed, with the degree of leverage involved with the many top mining plays, one would think that shares of the Canadian gold mining stocks would be a heck of a lot better-looking than the price of physical gold bullion itself.
Of course, gold prices can be very difficult to predict over the near, medium, and long term. And as a commodity heavily influenced by various global exogenous factors, there’s bound to be a high level of volatility.
Indeed, the same could be said for just about any other commodity. However, when it comes to gold, prices tend to shine most amid inflation and rising macro uncertainties. In recent years, there has been no shortage of inflation. And though inflation is coming back down to normal, there’s still a lot in the way of uncertainty as the economy wobbles and central banks (including the Bank of Canada and the U.S. Federal Reserve) cut interest rates.
Gold miners are a choppier ride. But the rough ride may be more worthwhile for gain-seekers
Many of the shining gold mining stocks seem to be priced with volatility in mind. And while some of the bigger bulls on gold foresee higher prices on the horizon, I’d argue that gold does not necessarily need to keep rising as it has been to sustain a nice rally in the miners.
Why?
The longer gold stays above an elevated level (let’s say US$2,200 per ounce), the more fuel the miners may have to march higher. Of course, there are other factors beyond just gold prices that could help power gains. Notably, operating economics and stewardship are key factors that separate the haves from the have-nots in the mining scene.
As gold looks to gain further, I’d look to give the following mining play a closer look while its chart is still muted relative to the price of gold itself.
Agnico Eagle Mines
Agnico Eagle Mines (TSX:AEM) is quickly becoming one of my preferred gold miners out there. The company has really been ramping up production of late. And though the firm has benefited greatly from the recent rally in gold prices, I think there’s more room to run as AEM stock looks to break out to a new all-time high. At $110 and change per share, the stock is pretty much near the highs it saw way back in 2020, at close to peak panic amid the early days of the pandemic.
Should gold continue gaining, I think it’ll be tough to keep Agnico from continuing its ascent. Year to date, shares have gained more than 53%. And going into year’s end, new investors should not be so surprised if new highs are in the cards, even if gold prices were to retreat slightly after their glorious midsummer rally.
With a nice 1.93% dividend yield to look forward to and some of the most impressive operations out there, I’d not be afraid to average into a position now and over time.