Gold prices rally amid crypto crash and inflation concerns

By Staff Writer / May 26, 2021 / Article Link

The price of gold is reached its highest level since January on Tuesday as it inches close to erasing this year's decline. Investors are turning bullish on the precious metal on fears about a weakening US Dollar and a crash in bitcoin and other cryptocurrencies.

Gold continues to face resistance from the $1,900 level, and is currently trading at $1,883.6 per ounce. Last week the prices reached their highest since January 8, climbing to $1,890.13.

Futures for Canada's main stock index rose on Tuesday on stronger gold prices. Gold stocks also trended higher. Two of the leading junior gold miner indices - the NYSE Arca Gold Miners Index (GDMNTR)1 and MVIS Global Junior Gold Miners Index (MVGDXJTR)2 - gained 7.1% and 7.4%, respectively, to end the month. When it comes to performance – senior and mid-tier gold miners have been outperforming gold since mid-March.

It is early to talk about a break-out but gold stocks have been reacting positively to the latest economic news, which led to ongoing correction in gold.

This will likely offset the decline in Junior mining stocks, which saw their short-term support line decline and ended Tuesday’s session close to it. There was no breakdown, but given the weak trading performance compared to gold and stocks, it seems that we won’t have to wait for it to materialize.

All of these factors have analysts believe that junior gold miners’ mining stocks are still undervalued? The HUI-to-Gold ratio is 0.16X, well below the 0.64X ratio reached in 2003.

Since April, several gold and miners have been reporting strong production figures and are set to report earnings soon. Because gold prices have been averaging over $1,700/oz in Q1 2021, the majority of gold miners have been able to report all-in sustaining cash costs of $1,000/oz or less. This makes another strong quarter for the sector as a whole quite likely.

Some like Newfoundland gold developer Marathon Gold (OTCQX:MGDPF) have been advancing 100%-owned projects. The junior gold miner’s Valentine Gold Project released a maiden resource estimate for the Berry deposit. The 1+ million ounce inferred resource addition lifts total resources at Valentine to 3.14 million (measured and indicated) and 1.64 million (inferred), close to 5 million ounces.

Other mid-tier and senior gold miners like Barrick and Kirkland Lake Gold are cashing up on strong production results from the first quarter. Investors should also keep in mind that things should only get better from here as production is weighted to the second half of the year due to mine sequencing.