Could You Be Tempted By A Gold Digger?

Could You Be Tempted By A Gold Digger?
Stéphane Renevier, CFA

about 2 years ago1 min

If you thought energy stocks were on fire, then have a look at Canadian and US gold mining stocks. They’re up a whopping 15% and 11% so far this month, outperforming their main indices by the same amount.

There are a few reasons why gold’s been on a tear recently (and you can’t say we didn’t warn you): inflation is still defying expectations, geopolitical tensions are keeping investors on their toes, and riskier assets are showing signs of fragility. And given that the whole of Wall Street has been shunning gold stocks in favor of energy stocks, prices have had some catching up to do.

Of course, the Federal Reserve’s (the Fed’s) plan to raise interest rates faster than the market expects could pose a threat to the rally. But investors are already pricing massive tightening this year, which means it would take a lot to surprise them at this stage. If anything, the short-term outlook looks pretty supportive for gold and gold mining stocks: inflation risks aren’t exactly likely to go anywhere, while Fed hikes should limit how much economic growth – and by extension risky assets – will climb. Put simply, gold may well have more surprises in store.



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