Gold And Silver Explode Higher, Mining Stocks Cheap

After a sharp correction and some choppy, sideways trading, gold and silver have broken out in a post-election rally – in part because the United States has yet to choose a winner.

Mining stocks grossly undervalued as gold/silver break out

The price of gold is now at $1946 per ounce, up roughly 3% so far this week.

Silver is trading at $25.10 per ounce and has jumped from as low as $22.60 over the past week (+10%).

As DWR regularly reminds investors, silver outperforming gold is indicative of strong bullish sentiment for precious metals. And with bullion prices still cheap, investors are encouraged to add to their positions.

But for those looking for the most bang-for-their-buck, you can’t beat gold and silver mining stocks. Even when gold and silver were at their recent highs, mining stocks were at historic lows (relative to metals prices) versus any previous bull market.

Since then, mining stocks have gotten significantly cheaper. They have retreated to valuations (versus metals prices) last seen early in the summer.

Load the boat…unless you believe that crippled Western economies will emerge unscathed as the COVID-19 second wave descends upon us. And you believe the political uncertainty and political gridlock in the United States will magically transform into a smoothly functioning government.

If you believe those things, you don’t need gold and silver. You can sit smugly and wait for Santa Claus to come down the chimney this Christmas.

For everyone else, bullion is cheap. But the mining stocks are still cheaper.

Advantage miners

Further greasing the wheels for a new rally in mining stocks is renewed weakness in oil prices. Crude oil is once again below $40/bbl – even after three straight days of gains.

With COVID-related economic weakness still sapping demand, oil remains a bad bet for investors.

Mining is an energy-intensive industry. Much of it still runs on oil.

Cheap oil prices = fat mining margins.

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Disclosure: The writer holds shares in First Majestic Silver, American Creek Resources, Minera Alamos Inc, and Silvercorp Metals. SKRR Exploration is a client of Dynamic Wealth Research.

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