Why Hecla Mining, First Majestic and Other Gold and Silver Stocks Sizzled Today
Precious metals stocks sizzled Thursday, with most gold and silver stocks up double-digit percentages through midday. Here’s how much the industry’s top-performing stocks had rallied from their highest trading points throughout the day as of 2:00 p.m. ET:
- Strive for silver (EXC 15.91%): up 15%
- heart mining (CDE 10.36%): increase of 11.9%
- First Majestic Silver (Ag 10.45%): increase of 10.9%
- Hekla mining (HL 9.11%): up 9.5%
A rebound in broader markets and precious metals prices ahead of important economic data fueled these stocks’ rally.
Most gold and silver stocks were hit earlier in the week after a sharp drop in commodity prices. On Thursday, however, gold prices shot up, surpassing $1,870 an ounce, a level not seen in more than three weeks.
Silver had a similar story to tell, with the gray metal’s prices topping $22 an ounce and recovering from lows after falling to nearly $20 an ounce in the second week of May.
In fact, both gold and silver prices corrected sharply in mid-April, which is why Thursday’s rally had such a big impact on industry stocks.
Several factors appear to be helping gold and silver prices recover. Ongoing concerns about high inflation and a slowing economy are urging investors to switch from stocks and risky stocks to safe-haven assets like gold and silver. At a conference on Wednesday JPMorgan Chase CEO Jamie Dimon even urged investors to brace for an “economic hurricane” triggered by the Russia-Ukraine war, inflationary pressures and interest rate hikes. Such warnings can be frightening and often raise interest in safe investing.
Meanwhile, data from payroll companies Automatic data processing Data released Thursday showed a slowdown in hiring, with the private sector adding just 128,000 jobs in May. That’s well below Wall Street estimates and the April numbers. Employment data is an important barometer of the health of the economy and as such can influence investor sentiment towards assets such as gold and silver, which are considered hedges against inflation and economic uncertainty.
Profitability for gold and silver miners correlates directly to metal prices. Of course, higher prices need to last longer to feed into miners’ profits, but the market is often quick to bid stocks higher each time gold and silver rise, in the expectation that this will help miners in particular, that boost production.
From that standpoint, First Majestic Silver could be a beneficiary as the company expects silver production to increase nearly 30% in 2022 thanks to last year’s acquisition of the Jerritt Canyon mine in Nevada. While the Company remains focused on silver, Jerritt Canyon is helping it diversify into the world-class Nevada mining region.
In contrast, Endeavor Silver – another pure silver company – expects lower silver production this year as it recently closed a mine. However, the Company expects to acquire a mine and advance a project in Mexico soon. Coeur Mining, a diversified precious metals company, also expects low to flat gold production this year.
Hecla Mining, the largest silver producer in the U.S., which mines nearly 40% of all silver produced in the country, even has a silver price-linked dividend policy — it pays a fixed quarterly dividend of $0.00375 per share plus a price-linked dividend above the silver price of $20 an ounce. Here’s how it works: If the miner’s average realized silver price falls between $20 and $25 per ounce in a quarter, you can expect an additional quarterly dividend of $0.0025 per share. That might not be much, but any passive income in uncertain times is welcome.
With each of these stocks also falling precipitously along with gold and silver prices since mid-April, any further rise in metal prices can be expected to propel them higher in the coming days.