Strong gold prices boosted Canada's main stock index futures on Monday ahead of the U.S. presidential election on Wednesday. As demand for the precious metal rose, gold prices registered a 0.47% gain to $1888.7 per ounce.
This comes amid a strengthening second wave of COVID-19 infections, which weakened the US dollar and saw global investors shift capital towards safer havens.
Predictably, this increased demand for gold at a time when many production facilities and supply chains are disrupted, saw supply starting to run low. And as the world begins to run out of gold, major mining companies will be pressed to buy the smaller firms – a trend that will see increase in value for the gold stocks of junior gold miners.
The case for gold is predicated by the upcoming fiscal stimulus program in the United States, which will see more money being printed. This will put pressure on the US Dollar, causing gold to register extraordinary gains in the months to come.
Given that gold miners are discovering less gold than they used to 10 years ago and there is no sign of demand slowing down (on the contrary), we are looking at a major restructuring in the sector. Major companies are already stepping up their acquisition activity and eyeing smaller exploration and junior miners. The most attractive junior gold miners are those that have recently struck discoveries or acquired properties in lucrative locations near major drilling programs. Their mining stocks have already been picking up due to the rise in gold prices but also as a result of the influx of capital from private investors and shareholders.
The consolidation of the gold industry is the logical solution to increase exploration and boost depleting reserves, lure more generalist investors and improve efficiencies.
As mining stock of junior miners are well placed for a win-win outcome from November’s U.S. election, Canada and Africa are the two regions that still need more work on consolidation.