How Could a Rise in Precious Metals Help Mining Stocks?
Precious metals rose
Gold futures for February 2017 expiration closed at $1,184.90 per ounce after touching the day’s high at $1185.80. That was the highest level for gold since December 5, 2016. The rise looks like a revival after a nearly 12.0% fall in the previous quarter.
Other precious metals such as platinum and palladium, which are used as auto catalysts in the industry, extended their rallies to new heights. Platinum rose 1.6% to $981.90 per ounce, a two-month high. It’s now trading closer to its 200-day moving average. Palladium also rose 1.6% to a five-week high of $768.10 per ounce. Silver rose 0.80% to $16.60 per ounce.
Funds that closely track the performance of platinum and palladium include the ETFS Physical Platinum (PPLT) and the ETFS Physical Palladium (PALL). Year-to-date, these two funds have risen 8.6% and 11.4%, respectively.
Mining stocks could rise more
Strong outflows from gold-backed ETFs have slowed down recently. Investors may start buying rapidly since the Asian buying season is approaching. Hedge funds and money managers have cut their net long positions in gold contracts for the eighth straight week, according to data on Friday, January 6, 2017.
Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, mentioned that the possibility of an economic boost under a Donald Trump administration has shifted economic risks to the upside. That may be beneficial for precious metals and mining stocks such as Silver Wheaton (SLW), Franco-Nevada (FNV), Pan American Silver (PAAS), and Newmont Mining (NEM).