The bullish run of gold may not quite be over yet. After reaching an all-time high in August 2020 when it nearly doubled its value, followed an expected correction As investors restored some of their confidence in a recovering market and economy amid efforts to contain the global pandemic, their interest in safe havens cooled off for a while.
Some analysts estimate a Second Gold Rush just be getting started. This could potentially signify an increase in value for Canadian junior gold miners. Their ability to act as highly leveraged plays capable of multiplying the gains of gold by margins is related to the significance of a gold discovery for a junior miner.
When we look at two Canadian junior miners Amex Exploration (TSX-V:AMX) and Starr Peak Exploration (TSX.V:STE; OTC:STRPF), we can see they boast stellar performance during the first gold rush. Their mining stocks registered the outstanding 120% and 300% gains respectively, over the past 52 weeks.
Both investors and analysts have expressed an interest in these gold stocks due to the companies’ enormous gold potential relative to their market valuations - meaning they have a lot to gain if things go right.
Investors’ renewed interest in gold mining stocks comes after Berkshire Hathaway made a sizable investment in Barrick Gold (NYSE:GOLD)(TSX: ABX) in 2020
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Additionally, the expected $1.9 trillion stimulus package announced by the Biden Administration is feared by some to lead to further devaluation of the already weakened U.S. Dollar. As a result, some gold moguls are now stockpiling gold assets such as gold stocks and bullion because, expecting multi-year gains. So they’re on the lookout for a junior miner with major upside.
This is good news for Canadian junior gold miners as they have seen very few disruptions in the months of lockdown. EY’s latest Canadian Mining Eye index shows that TSX mid-tier and junior mining companies jumped 9% in Q4 2020, and 2021 is expected to see them outperform even more.
The top pick of Canadian resource mogul Robert Friedland is Ivanhoe Mines Ltd (OTCQX:IVPAF) (TSX: IVN) while billionaire Eric Sprott has been actively investing in the mining stocks of Amex Exploration (OTCQX: AMXEF) (TSXV: AMX), Vizsla Resources Corp. (TSXV: VZLA) (OTCQB:VIZSF) and Orefinders Resources Inc. (TSXV: ORX).
With gold sitting at multi-year highs, entry costs for investors remain high. The global macro-environment setup also continues to be highly supportive of the yellow metal. Projections for a weaker U.S. dollar, more stimulus, negative real yields, dovish monetary policies, and rising inflation expectations are all contributing factors for an expected second gold rush in 2021.