If inflation is more than just transitory one sector that may benefit is precious metals.
Right now, a number of silver mining stocks seem to be indicating just how possible that may be. Investors looking to hedge against inflation seem to have noticed as the prices of these are revealing: they’ve stopped declining.
Let me show you what I mean. Here’s the daily price chart for Coeur Mining
With headquarters in Chicago and operating 5 mines in North America, the New York Stock Exchange traded company peaked at above 12 in April. It’s been downhill, basically, since then.
Now take a look at the positive divergence between price and the moving average convergence/divergence indicator (MACD, below the price chart). The “slightly lower lows with higher MACD lows” may be significant, especially given how the 50-day moving average (blue lined) appears to be on the verge of turning upward.
The Pan American Silver daily price chart looks like this:
This Canadian-based company is traded on the NASDAQ
The daily price chart of SSR Mining is here:
With offices in Denver, Vancouver and Toronto, this NASDAQ traded company mines for gold and silver. Note the downtrend line connecting the June low with the late September low — the MACD indicator beneath it is diverging positively. Price chart analysts will be following this closely to see if the 50-day moving average (blue lined) can cross above the 200-day moving average (red lined).
Silvercorp Metals’ daily price chart looks like this:
This Canadian based miner is AMEX-traded. The company has a price-earnings ratio of 17, a price to book of 1.5, no long-term debt and pays a small dividend (.71%). Silvercorp could almost be considered a value stock.
Like the silver mining stocks mentioned above, a positive price divergence is developing. That is, the MACD indicator is moving higher versus the “lower price low” picture from August to October.
Investors here seem to be convinced that this type of classic inflation hedge may be worthwhile given the macroeconomic environment. If the Fed’s tapering winds down and the yields on the Treasury 10-Year notes and 30-Year bonds head higher, the effects could be dramatic.
The price action of this sector may be important to watch over the next few weeks.
Not investment advice. Do your own research and always consult with a registered investment advisor before making any decisions.