Gold Was Shining Bright in January
Gold is on an upward trend thanks to rising interest rates and a weakening U.S. dollar.
In mid-January, we sent out a Trade of the Day titled “Gold Is Getting Ready to Shine.” Since then, the price of gold has moved up by $40 per ounce, pushing through the $1,300 price level for the first time in months.
The VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ) that we recommended in the article is up more than 8% in just two weeks. In addition, our small cap pick, Pretium Resources (NYSE: PVG), is up more than 15%.
Gold is looking better than good right now.
The Fed signaled a pause in raising interest rates this week, and the dollar is showing signs of weakness. Both factors are critical for gold to continue higher.
After almost a decade of strength, the dollar looks to be continuing its slide as the year moves ahead. The government has signaled it wants a weaker dollar and low interest rates.
While not the norm, this type of overt action by the government should help gold prices move even higher.
Also, gold stocks are in acquisition mode because mining development and exploration costs are going to the moon. It’s now cheaper to buy a competitor at current depressed levels than it is to develop a new mine.
We recently saw two massive transactions in the precious metals sector. Last year, mining giant Barrick Gold bought Randgold. Then, just before the end of the year, Newmont Mining announced plans to purchase Goldcorp for $10 billion. These multibillion-dollar deals might signal that the fun in the sector is just beginning.
We’ll keep our eyes peeled for more mergers and acquisitions in the metals sector this year as miners bulk up for a potential bull run.