Gold and silver prices decline on stronger Dollar

By CanadianMiningReport.com Staff Writer / September 25, 2021 / Article Link

Gold and silver stocks took a dip on Thursday as prices of precious metals fell on a stronger US Dollar.

Investors turn to gold and precious metals as a safe haven asset against economic uncertainties. For this reason, new promising results from the economic data gave hope for a recovery in the months following lockdowns.

On Thursday, the Commerce Department reported a 0.7% growth in retail sales in August, showing strong consumer. The Philadelphia Federal Reserve also reported strong manufacturing activity and optimism among firms surveyed about the end of 2021. There are expectations for the Federal Reserve to increase interest rates sooner than expected. That boosted the U.S. Dollar in Thursday’s trading session, sending gold and silver prices crashing.

The gold spot price fell more than 2% to near five-week lows. Silver prices sank 4.5% to multi-month lows. This triggered a sell-off in gold and silver mining stocks.

Coeur Mining shares were among the shares that dipped the most due to the miner’s exposure to gold and silver. The company has been spending aggressively on its Silvertip mine in Canada as it intends to start commercial production by 2023. Coeur aims to turn free cash flow positive in 2023, but it will require a strong gold and silver price environment.

Endeavour Silver and Hecla Mining are two silver stocks that took a dip as a result of the slump in silver prices. Endeavour Silver's maintenance cost has risen steadily in recent quarters, squeezing its margins. The miner's prospects could improve provided if silver prices start to rise.

Hecla Mining, hasn’t lost its strong footing so far this year from an operational performance standpoint. It continues to pay a dividend to stockholders, although investors are wary of Hecla's recently launched variable dividend policy.

Sibanye-Stillwater’s mining stock is exposed to both gold and platinum metal prices. Although both gold and platinum prices fell on Thursday, there is ongoing global semiconductor chip shortage that's impacting global car production. Platinum group metals are widely used in exhaust control catalytic converters in cars and picking up industrial production has given Sibanye’s stock a boost to withstand falling metal prices.

Additionally, Sibanye-Stillwater announced it’s buying a 50% stake in a lithium project in Nevada.  Lithium's use in electric vehicle batteries means there are potentially big growth prospects for the miner ahead.

Investing in precious metals, gold and silver stocks may seem riskier right now.  Volatility is a natural component of all markets and investors must prepare for short-term fluctations in stock prices. Remember to carefully pick the mining stocks you invest in and don’t commit more money than you can afford to lose. Such a short-term dip in gold stocks and silver stocks presents a good opportunity to buy some cheap and turn a profit when prices rise later.