Precious metals stocks over the past few days have been, well, precious. That's because many of them rose on the back of increases in the materials they mine and sell.
Hecla Mining(NYSE: HL), for one, notched a double-digit increase by rising almost 13% in price over the week, according to data compiled by S&P Global Market Intelligence. Ditto for Sibanye Stillwater(NYSE: SBSW), which advanced by 11%. Slightly behind but still posting a healthy gain was Ero Copper(NYSE: ERO) and its 8%-plus rise.
These metals are becoming much more precious
The performance and share price trajectory of any company in precious metals, of course, depends a great deal on the demand for those materials. Happily for Hecla, Sibanye Stillwater, Ero, and their many peers, they are having quite the run lately.
Over the last month, the S&P GSCI Precious Metals index has risen by nearly 11%, notably outpacing the bellwether S&P 500 index for stocks. Over the past week alone, against a slightly (1%) slumping S&P 500, the S&P GSCI Precious Metals' gain has topped 5%.
Prices for both gold and silver have been notching new highs lately. One of the major drivers has been the widespread expectation that the Federal Reserve will cut interest rates. Lower rates tend to drive up the prices of precious metals as they are becoming more competitive with safety investments like bonds. Gold, silver, and the like are considered more inherently valuable than bonds, which pay less interest as rates decline.
Adding to this is the development of the massive Chinese economy. The country's real estate sector is in notoriously poor shape, and investors there have been reallocating their money into assets considered relatively stable and safe. For many, this means precious metals.
Compounding all that, a relatively shaky geopolitical situation is making central banks around the world nervous. In such an environment, central banks like to hedge by stocking up on such materials.
Can this rise last?
The million-dollar question, of course, is whether this rally is sustainable. I feel it is, not least because Fed officials have see-sawed back and forth somewhat about their eagerness for those rate cuts, and meanwhile, overseas investors and central banks remain jittery. Gold, in particular, is a comforting investment for many individuals and institutions, and they should continue to seek comfort in that and other valuable metals.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
