Looking at the Gold Miners - Q1 2022 Results May 13, 2022
“n just several weeks gold stocks have done an abrupt turn-one-eight from mounting popularity as their gains grew to being mired in universal bearishness. But dumping this sector given the extraordinary market backdrop is a baby-with-the-bathwater type of mistake. With inflation raging, gold and its miners’ stocks are the best investments now. History has proven that true regardless of stock bears and Fed rate hikes.”
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“The major gold miners’ stocks have plunged in recent weeks, obliterating positive sentiment. They got sucked into the serious stock-market selloff fueled by extreme Fed hawkishness, which spawned big fear. But that is rash given this sector’s long record of powering higher on balance through general-stock bear markets. The gold miners’ fundamentals remain solid-to-strong, as revealed in their just-reported Q1’22 results.
The most-popular major-gold-stock benchmark remains the venerable GDX VanEck Gold Miners ETF. Launched way back in May 2006, it has since parlayed its first-mover advantage into an insurmountable lead. Even in its present battered state, mid-week GDX’s net assets of $13.0b dwarfed those of the next-largest 1x-long gold-miners-ETF competitor by a staggering 25.9x! GDX is effectively the only game in town.
The larger gold miners were actually having a great year until the stock markets started crumbling several weeks ago. By mid-April GDX had surged a smart 27.6% year-to-date! That amplified gold’s parallel rally by a big 3.4x, better than GDX’s usual 2x-to-3x gold-leverage range. And both the metal and its miners’ stocks were trouncing the flagship S&P 500 broad-market index, which had dropped 7.9% in that same span.
That’s how gold and gold stocks usually work during material stock-market selloffs, powering higher on balance as general stocks weaken."
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"Since gold stocks’ latest interim high in mid-April, the S&P 500 has plunged a serious 10.4%! That heavy selling spawned big safe-haven buying, fueling a monster 3.2% surge in the US Dollar Index in that short span. That flight to cash unleashed massive gold-futures selling, hammering the yellow metal a sharp 6.3% lower. The VIX fear gauge soared 47.1%. All that bludgeoned GDX 22.6% lower in only 17 trading days!"
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“[G]old-futures speculators’ fears of Fed rate hikes are supremely-irrational. The Fed’s thirteenth hiking cycle of the modern monetary era since 1971 is underway. Gold actually thrived in the previous dozen, averaging hefty 29.2% gains during their exact spans! Fed tightenings are bullish for gold and therefore its miners’ stocks because they are bearish for general stocks, greatly bolstering gold in investment demand.
So for hardened contrarians able to buck unreasonable herd fear, this recent big-and-fast gold-stock drawdown is a fantastic buying opportunity. Rather than succumbing to groupthink on this sector, smart traders should consider the major gold miners’ fundamentals and outlook. We just got fresh updates on how they are actually faring operationally and financially in their latest just-finishing Q1’22 earnings season.”
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“Last quarter proved solid-to-strong for major gold miners. While the larger ones continue to struggle with depletion which is nothing new, mining-cost rises moderated despite the severe inflationary pressures festering from this profligate Fed’s vast deluge of new money. The resulting higher prevailing gold prices in Q1’22 really boosted implied sector profitability. The gold miners are still making money hand-over-fist!”Looking at the Gold Miners - Q1 2022 ResultsLooking at the Gold Miners - Q1 2022 Results
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“Amazingly despite gold’s sucked-into-heavy-stock-market-selling drubbing in recent weeks, its average price so far in Q2’22 is still running $1,915! If gold bounces soon as it ought to on extreme gold-futures selling reversing into big proportional buying, this quarter’s average gold level could rival Q3’20’s record high of $1,912. Couple that with lower AISCs on rising output, and gold miners’ earnings could really surge.
So despite recent weeks’ big-and-fast gold-stock plunge that decimated sector sentiment, the major gold miners’ fundamentals remain really strong.”
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“Gold-mining profitability last quarter was among the highest on record, and ought to improve further as this year marches on. The gold miners are mostly forecasting improving outputs along with lower costs in coming quarters. That is really-bullish for earnings growth with gold prices highly-likely to keep climbing on balance in this raging inflation. The beaten-down gold stocks are far too low to reflect these strong fundamentals!”
[Full article below]
https://www.mining.com/web/gold-miners-q1-2022-fundamentals/