Peter Schiff Says Gold Stocks Show 'Extreme Bearishness' Despite Yellow Metal's Record Run: Can These Stocks Climb A 'Wall Of Worry?'

Author: Shanthi Rexaline | December 02, 2023 03:10pm
Gold has been on a tear on expectations that the Fed is about to reverse its string of rate hikes, but gold mining stocks are lagging behind.

Gold has been on fire of late, propelled by expectations that the Federal Reserve will soon begin cutting rates. Economist Peter Schiff, who is a avowed gold bull, commented on the commodity’s move in a post on X, formerly Twitter, on Friday.

What Happened: Spot gold settled Friday’s session at $2,070.90 a troy ounce after rising to an intraday high of $2,075.34. Gold futures for December delivery rose 1.72% before ending at $2,073.20.

So far this year, the spot gold and gold futures have rallied about 13.5%. In comparison, the S&P 500 Index has advanced about 19.67%..

Commenting on the move, Schiff said that, despite gold’s $35 climb on Friday and its record close, gold mining stock rose by a more modest percentage than gold. This, he said, suggested “extreme bearishness.”

Just to hit a 52-week high, gold stocks still have to rise 12%, he added.

Despite today's $35 rise in gold and its record-high close, gold mining stocks actually rose by a lower percentage than #gold, indicating extreme bearishness. Gold continues to climb a classic wall of worry. In fact, gold stock still need to rise 12% just to hit a 52-week high.

— Peter Schiff (@PeterSchiff) December 1, 2023

With inflation cooling off following Fed’s aggressive rate hikes that took rates to a 22-year high of 5.25%-5.50%, market participants now expect the central bank to begin reversing its rate hikes. This will result in the weakening of the dollar and in turn strengthening of gold. Gold and dollar share an inverse relation as the yellow is denominated in dollar.

The VanEck Gold Miners ETF (NYSE:GDX), an exchange-traded fund that tracks performances of gold miners, has added about 11% for the year, underperforming spot gold and gold futures. Gold mining stocks could catch up with gold’s rally as higher prices would result in higher realized prices for the companies and boost their top-line.

Benzinga screened some gold stocks, running them through certain criteria, and these include:

• Agnico Eagle Mines Limited (NYSE:AEM)
• B2Gold Corp. (NYSE:BTG)
• Franco-Nevada Corporation (NYSE:FNV)
• Newmont Corporation (NYSE:NEM)
• NovaGold Resources Inc. (NYSE:NG)

The criteria used for screening are:

• Over $300 million market cap
• Average trading volume greater than 500,000
• Analysts’ recommendation of “Buy” or greater
• Average analysts’ price target, which is 20% above the current price

GDX ended Friday’s session at $31.81, up 1.56%, according to Benzinga Pro data.

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Photo: Shutterstock

Posted In: AEM BTG FNV GDX NEM NG