Mar 22, 2020 (GoldStocks.com via COMTEX) -- Last week was another volatile one for gold and gold stocks . The price of the precious metal slid on March 16 to lows of $1,450.90. But for the rest of the week, gold traded relatively sideways in a consolidation pattern. By the end of the week, we saw gold close back above $1,500/ounce. While big swings in gold price aren’t the norm, the stock market itself could take some of the blame right now.
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A wave of global stimulus has brought central banks back to the table. Monetary policies are getting put in place to hedge against whatever fall-out could come from the coronavirus pandemic. Meanwhile, we’ve seen a mad dash to currency in light of the recent market sell-off. This is one of the key components of gold’s latest downtrend. Furthermore, compared to the general market trend, gold and stocks are somewhat correlated at the present.
This has come as somewhat of a surprise to investors. During hard economic times, buying gold has been a huge safe-haven to act as a countermeasure. What’s more, is that this flight to cash isn’t the only source of gold’s volatility. The ever-changing margin call scenario has investors taking profit from valuable positions like gold in order to cover these margins.
This is half the reason, in my opinion, that gold hasn’t plummeted the same 30%+ that equities have. While investors have taken profit, they haven’t appeared to completely sell-out of their gold positions. In the long-term, this could bode well for gold especially considering it held that important $1,450 level last week. But amid the latest push by central banks and governments to ease the pain of a potential fall-out, there are key fiscal factors that could weaken the dollar and boost the price of gold:
Lower interest rates and quantitative easing
Slowing economic growth due to economies of scale shutting down
Central banks printing new money to flood the market
So given a more long-term view of potential drivers of gold prices, it doesn’t hurt to keep it on your radar. Meanwhile, as new figures will ultimately come out this week on new coronavirus cases, we’ll see how the market reacts. In this case, here are a few gold stocks to watch heading into the week.
First, IMC International Mining ( IMCX Stock Report )( IMIMF ) is no stranger to big moves. What it has been a stranger to, however, is the gold sector’s consolidation. If you look at the chart next to the price of gold, you’ll see a very clear difference in trend:
Obviously, the divergence in trend is noticeable and something unique to IMC specifically. it has been one of the only gold stocks to demonstrate this type of strength during the latest bout of pressure in the gold market. Never the less, there are a few things supporting the bullish case for the company. Much of the more recent attention is placed on the latest multi-million dollar Thane Minerals acquisition. Not only does the deal see IMC acquire Thane and its mineral-rich Cathedral Property, but it also places industry vet, Greg Hawkins as Chairman of the Board.
Hawkins was the Founding Project Consultant and/or Founding Director of seven public and private Exploration/Development ventures. Four of these ventures were built out to a point where they were eventually bought out. The largest deal came from the $1.8 billion acquisition of Nevsun Resources by China’s Zijin Mining. The company will host a conference call with GoldStocks.com on March 30th to discuss everything in even more detail. Full call-in information is provided in the company’s March 20 update .
Equinox Gold Corp. ( EQX Stock Report ) saw a strong day of trading to close out the week last week. Shares of EQX jumped to highs of $6.99 before closing the week at $6.15. While the gold stock dipped with the broader sector earlier this month, its recovery has been much stronger than others.
Earlier this month, Equinox and Leagold Mining completed a business combination resulting in the formation of one of the world’s top gold producing companies. While Leagold’s shares were delisted, Equinox has become the prevailing gold stock. Ross Beaty, Executive Chair of Equinox Gold, stated: “We have created a major gold producer by combining the assets and leadership teams of Equinox Gold and Leagold, with a peer-leading growth profile and powerful financial, technical and operational management. Equinox Gold now has six producing mines, two development projects, two expansion projects, and the financial capacity to fund its development plans.”
Similar to other gold producers like Barrick Gold ( GOLD Stock Report ) and Newmont ( NEM Stock Report ), COVID-19 has been a concern. But just as the other two companies have done, Equinox updated shareholders saying it expects to operate without interruption.
What list of mining & gold stocks would be complete without a silver stock? SilverCrest Metals ( SILV Stock Report ) continued its week-long uptrend in price on Friday. The silver stock reached lows of $3.28 at the start of the week and finished out at $5.18. This also followed highs of $5.57 during the March 20 session.
The move came amid the latest deal or lack thereof between SilverCrest and National Bank Financial. The two had a deal in place that would have seen SilverCrest raise a little more than $75 million at a fixed price of $8.25 per share. However, National Bank terminated the agreement taking a “disaster out” clause. SilverCrest isn’t letting this one go, however. The company intends to pursue legal action against the bank citing that National breached certain obligations under the agreement that was in place.
SilverCrest began 2020 with C$124 million in the bank and no debt. Furthermore, in its 2020 outlook, the company has budgeted roughly $16 million for an exploration drill program. According to the company, “Overall, the Company is in transition at Las Chispas from aggressive and systematic exploration, successful discovery, resource estimation, and the completion of a PEA to completing a Feasibility Study for a mine construction decision and potential major construction startup in mid-2020.”
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