How the US Fed Goosed These Gold Stocks

Unlimited QE. Whatever it takes.

That’s the word from the US Federal Reserve.

From The Wall Street Journal:

The central bank signaled it would do practically anything—extending loans to big and small businesses, backstopping funds to municipalities and purchasing hundreds of billions of dollars of government debt—to help an American economy in a race against time.

With the US Congress locked in partisan debate over the next tranche of their trillion dollar stimulus package, the Fed’s move comes as welcome news to battered markets.

Gold looks to be one of the early winners

Gold looks to be one of the early winners. The yellow metal is up 4.7% in US dollar terms overnight. And in Aussie dollars, gold reached new record highs.

That’s good news for Aussie gold miners, as you’d expect.

Newcrest Mining Ltd [ASX:NCM] is up 9.4% in intraday trading.

Saracen Mineral Holdings Ltd [ASX:SAR] is up an eye-popping 21.6% so far today.

And on the smaller end of the spectrum Red 5 Ltd [ASX:RED] is up 24.3% as at 3pm AEDT.

That’s not enough to erase these companies’ losses from the panic selling over the past month. Though it’s a good step in the right direction.

However, keep in mind that today’s super volatile times require heightened diligence. One concern a colleague raised is that some miners may be forced to close their operations. Or at least limit production. That would likely see their share prices suffer.

We still expect gold to move higher over the coming months, and gold stocks to outperform the wider market.

But beware the huge unknowns presented by the coronavirus pandemic and the global governments’ lockdown measures to control it.

And don’t rush into stocks based on the mainstream media’s daily headlines.

If you’re considering investing in the gold sector, you may find The Rum Rebellion editor Greg Canavan’s free special report useful. It’s titled ‘How to Pick Winning Gold Stocks’.

You can find that by clicking here.

Bernd Struben is an Editor of The Rum Rebellion. In this capacity, he has access to one of the most intriguing and powerful networks of practical investment insight anywhere in the world.

Bernd has worked on four different continents, and has more than 20 years of professional finance, editorial, and management experience. He holds a degree in economics.

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