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Gold & Silver Stocks Could Undergo a Kodak-Esque Parabolic Rise

Last Updated September 25, 2020 8:41 PM
Chinmay Pandya
Last Updated September 25, 2020 8:41 PM
  • Gold and silver prices have surged of late before undergoing a bit of profit-taking.
  • While owning physical gold and silver will be fruitful for investors in the time to come, putting all eggs in one basket is always a risky strategy.
  • Gold and silver mining companies provide a diversification opportunity.

A spectacular surge in gold prices saw them hover around all-time highs recently. Silver joined the party eventually, after breaking out of years of consolidation.

Gold and silver prices
Gold and silver prices feed off investor fears. | Source: Yahoo! Finance 

Meanwhile, gold and silver stocks have outperformed both precious metals while flying under the radar.

Gold stocks and gold prices comparison.
Gold stocks have outshone the yellow metal. | Source: Yahoo! Finance 

Gold and Silver Stocks Offer Diversification Benefits

Owning physical gold and silver could prove fruitful because of the uncertainties that lie ahead. However, the ‘all eggs in one basket’ strategy is risky, and gold and silver stocks represent a substantial diversification opportunity.

These companies benefit from rising precious metal prices. In stark contrast to the FAANG stocks, precious metals miners have solid fundamentals to back up their recent rallies.

Despite the substantial rallies from gold and silver stocks, there could be a lot more to come. Once Robinhood day traders sniff blood, there could be a feeding frenzy that drives up the prices multifold, just like what happened with Kodak (NYSE:KODK). 

Among all the precious metal stocks and ETFs, a few stand out from the perspective of diversification.

Sandstorm Gold

As a royalty company, Sandstorm Gold (NYSE:SAND) enjoys all the benefits of a typical miner but without the risk. Founded in 2008, the company partners with mines in return for royalties on gold production.

Sandstorm Gold doesn’t bear the risk of exploration and does not need to purchase expensive machinery. Since 2008, the combined market cap of companies Sandstorm Gold has reached $45 billion. 

As gold prices surge, so has Sandstorm’s stock.

Sandstorm Gold share price
Sandstorm Gold stock has soared 49% over the past year. | Source: Yahoo! Finance 

As businesses began raising more debt to survive the coronavirus pandemic back in April, Sandstorm Gold became officially debt-free. 

Rising gold prices will help Sandstorm generate higher cash flow.

While SAND has been nowhere near Robinhood traders’ top preferred gold stocks , it’s starting to catch their eye.

Robinhood traders' holding in Sandstorm Gold stock.
Robinhood traders have started noticing Sandstorm Gold. | Source: Robintrack 

Solid fundamentals and a potential Robinhood feeding frenzy could be the perfect catalyst for a parabolic rise in Sandstorm Gold’s stock price.

Global X Silver Miners Sees Huge Cash Inflows

Since its inception, the Global X Silver Miners ETF (SIL) has never seen such inflows  as it is experiencing today.

Silver prices vs Miners total assets.
Global X Silver Miner ETF has outperformed silver. | Source: Twitter 

In addition to institutional money, this ETF has also attracted interest from Robinhood traders.

Robinhood traders' SIL holdings
Interest in SIL has peaked of late. | Source: Robintrack 

The ETF has surged 70% in one year. The majority of fund inflows have started to come in over the past three months. 

This fund provides a solid diversification opportunity from physical silver. While storing physical gold can be manageable, storing physical silver can be daunting because of the larger quantity.

As gold and silver prices feed off the looming geopolitical  and economic uncertainties, Sandstorm Gold and Global X Silver Miner ETF could extend their gains further.

Of course, the falling dollar will be on the top of investors’ minds going ahead.  Value erosion due to exploding supply of money by the Federal Reserve  is a spectacular tailwind for precious metals prices.

With a host of tailwinds lining up, all these stocks need is a spark in the form of Robinhood traders to undergo a massive rally.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the stocks mentioned.