Canada's main stock index TSX rose on Thursday, driven in part by rising gold prices against lower US Treasury yields and a weaker dollar. One of Canada’s major gold miners Barrick Gold Corp also posted gains on a positive earnings forecast.
Canadian gold miner Barrick Gold Corp ABX.TO rose 1.6% as it maintained its full-year outlook. Despite a fall in gold production slipped by 9% in the first quarter, it forecasts higher output in the second half of the year as it ramps up some operations.
The climb in gold prices to a near two-week high of $US1,745 ($2,276) an ounce fuelled a cautious sentiment about its improving prospects. Although some analysts expressed caution that gold prices are likely to remain neutral if prices did not break past the $US1,750 barrier. Others like Commerzbank analyst Carsten Fritsch pointed that solid economic data is failing to provide support for the US dollar and bond yields, which means that the gold market will start to pick up.
As the U.S. economy remains weak ahead of an expected fourth wave of COVID-19 infections, the expected economic turmoil can push gold prices to an all-time high of $2,075 per ounce over summer. If gold follows the same pattern as during the financial crisis of 2008, they can climb over the next couple of years until the economic uncertainty and the fear of inflation subside. Before going down, gold will set new historical record highs above the 2020's August high and mining stocks of junior gold miners will be the winners.
While buying gold bullion at these levels is a good idea, investing in gold stocks can yield far better returns as gold moves 1,5x. 2x or even 3x.
Most investors understand that if you are able to invest in a junior gold miner before it makes a major discovery, you could be rewarded very handsomely. The leverage increases during a bull market because junior gold miners are typically very sensitive to the price of gold.
One such mining stock is Starr Peak Mining (TSX.V:STE; OTC:STRPF), which is very well positioned to leverage both advantages to the fullest.
Starr Peak’s project is close in proximity to the property of Amex Exploration (TSX-V:AMX). Amex hit high-grade gold in three distinct zones in Quebec. Last year, Starr Peak Mining (TSX.V:STE; OTC:STRPF) commenced drilling on what could turn out to be a premium-grade gold asset with a real proven pedigree. In early March, the Company announced they were bringing a second drill rig on property to join in on the program. This sort of move is only done if results from the drilling are promising.
Investors can expect announcements for Starr Peak’s drilled holes to be released in the coming days and weeks. The company is now ready to take advantage of their close proximity to that of the neighboring Amex Exploration (TSXV: AMX) – a strategic position that could prove lucrative to its mining stocks.