A Rich Vein of Opportunity for Gold and Silver Miners
Ned Naylor-Leyland, Investment Manager for Gold & Silver, assesses the prospects for the unloved shares of gold & silver miners and a possible shift in Fed policy.
I see such an opportunity in gold and silver mining equities as we head into the third quarter of 2022.
As such, the two monetary metals have taken a beating in the past two months as the US Federal Reserve (Fed) promised more and more hikes while simultaneously insisting that inflation will come down due to such policy moves. The associated gold and silver miners have capitulated, and longer-term investors have fled. They are now back at career-low sentiment levels, with even the highest quality gold and silver miners and development assets trading on bargain basement-low NAV multiples. Gold and silver miners are now trading down 50% from their peak of August 2020 and are at levels last seen when gold was trading below $1400/oz. We have seen one of the worst quarters in recent memory for this volatile asset class, but a major policy error and subsequent pivot do look close to hand. When the Fed does pivot from hawkish to dovish these unloved equities may be a primary beneficiary of such a change. What is more, the $Gold price still lies within shooting distance of all-time highs, something that may kick into gear a genuine wider generalist move towards, rather than away from, this sub-sector.
- Firstly, gold prices measured in GBP/EUR/JPY have already broken out into a new higher trading range, and only $Gold continues to lag and is waiting for confirmation. This of course is a function of dollar strength in global F/X markets.
- Secondly, and more importantly for the wider sector, in April of this year, this aforementioned and crucial $Gold price fell below that key technical level of $2100 for the third time since 1980. Because the $Gold has remained below its inflation-adjusted high of $2100 for 40+ years, since 1980, gold investors are the only ones who can say that they have never seen a genuine bull market in their investing careers. This is even more true for gold and silver mining equities, which are flow sensitive and need new participants to move with force.
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