Expecting a Move in Metals Miners On a Fed Cut

by: Andy So

I am guessing that we are 8 working days away from the beginning of a major rally for precious metals stocks. This rally, as I have written in the past, will be driven by a possible cut in interest rates by the Fed. I am looking for a 0.25% to 0.5% cut on September 18th.

Gold and silver are making major moves up and the USD index is falling closer to breaking under $80. If we can maintain levels above $680 for gold and $12 for silver, it should be a cinch for gold to break $700 and silver to break $13 using an interest rate cut as the fuel.

Commercial shorts, as evidenced by the most recent COT report, seem to share the perception that an interest rate cut is highly likely.

The official COT summary of options and futures for gold, silver and copper can be found here.

Prices of many gold and silver mining stocks are far more depressed than the actual price of the metals. Plenty of gold mining stocks are trading as if gold were closer to $600 instead of $700. Silver mining stocks are trading as if silver were closer to $10 instead of $13. There is a lot of catching up to do to for prices of precious metals equities to match physical prices. I suspect that we may shatter all records on the heels of the Fed.

Here are a few precious metal mining stocks to consider that are on my watchlist, in no particular order:

  • Barrick Gold Corporation (NYSE:ABX)
  • Newmont Mining Corporation (NYSE:NEM)
  • Silver Wheaton Corporation (SLW)
  • Gold Fields Incorporated (NYSE:GFI)
  • Coeur d’Alene Mines Corporation (NYSE:CDE)
  • Tanzanian Royalty Exploration Corporation (TRE)
  • Northgate Minerals Corporation (NXG)
  • IAMGOLD Corporation (NYSE:IAG)
  • Hecla Mining Company (NYSE:HL)
  • Pan American Silver Corporation (NASDAQ:PAAS)

*Disclaimer: The author is currently holds positions in Coeur d’Alene Mines Corporation, Tanzanian Royalty Exploration Corporation and Northgate Minerals Corporation.