Mining Stocks Could Generate Gains Like Cryptocurrencies & Tech Stocks Did
If you are looking for the next big trade, don’t ignore precious metal mining stocks. They could be setting up to reward investors immensely.
You see, over the past few years, precious metals were ignored because other asset classes were doing really well. During this period, precious metal mining stocks were sold off by investors.
Why would you buy gold when you could buy skyrocketing Bitcoin? Or why would you even look at silver prices when Amazon.com, Inc. (NASDAQ:AMZN) is a trillion-dollar company and analysts are telling you its stock could go higher?
In the new year, don’t be shocked if investors all of a sudden start to pay attention to precious metals again.
Why? Because everything else looks bad.
There are a lot more risks present these days than there were previously. The housing market is doing horrible, the high-flying cryptocurrencies have crashed badly, the once-hot stocks are not hot anymore, there are worries about the global economy slowing down, the U.S. economy could be headed toward a recession, China is facing headwinds, the eurozone is struggling, and the list goes on.
Precious metals are something that investors rush to when things are looking bad. If we see a rush toward precious metals like gold and silver, we could see their prices soar.
Mind you, over the past few years, we have seen the fundamentals of the precious metals market improve significantly. So, if there’s a rush to buy these metals, the move to the upside could be huge.
Coming back to precious metal mining stocks, as precious metals were ignored, miners faced a lot of scrutiny from investors.
Across the board, we have seen mining stocks tumble in value. For perspective, look at Barrick Gold Corporation (NYSE:ABX). It traded close to $60.00 in 2011. Now it trades well below $15.00.
Several major miners have become penny stocks over the past few years.
Putting it in simple words, right now, mining companies’ reserves and resources are literally valued at dirt-cheap prices. Their operations don’t really matter and their properties are being disregarded.
What Will Happen if Precious Metal Prices Move Higher?
Here’s the thing: as mining stock prices were tumbling lower, companies were actually behaving like businesses should.
Across the board, we saw mining companies focus on streamlining their operations. They lowered their costs and focused on cash flow. In all honesty, they were forced to do this; they wouldn’t have survived for too long otherwise.
Now, if there’s a rush toward precious metals, miners won’t need significantly higher gold prices in order to see their profitability jump.
A 20% move to the upside could increase their profitability by a large amount. And, obviously, their stock prices would reflect this by rising immensely. That means mining stocks could provide leverage gains to investors.
This will sound like a bold statement, but it’s worth making: just like how investors made money with cryptocurrencies and technology stocks, they could make solid returns with mining stocks. Mining stocks are currently selling for pennies on the dollar.