Top 3 Reasons to Keep Your Eyes on Gold As Inflation Sets in

gold inflation
Published on: April 14, 2022
Author: Philip Tai

As inflation fears and the war in Ukraine continue to impact the markets, gold prices have begun to rise.  Gold stocks have also begun rising, with the SPDR® Gold Shares (GLD) ETF rising over 9% since January 2022.  Will gold keep rising in 2022?  Here are 3 reasons why we think investors should keep an eye out for gold stocks.

1, Gold price reach 1-month high with soaring inflation

Long seen as a hedge against inflation, gold responded to record setting inflation numbers in early April with an extended streak of gains this week.  As inflation makes things more expensive, gold, likewise, becomes more expensive. Unlike many assets, gold grows in value as our money declines in value. And historically, it does so very reliably.

Spot gold rose 0.6% to $1,979.66 per ounce by 12:30 p.m. ET, its highest in a month. US gold futures were up 0.3% to $1,981.80 per ounce in New York.

In a recent report from Reuters, Edward Meir, an analyst with ED&F Mann Capital markets stated that Gold seems to be “ignoring the stronger dollar and rising US rates, and they seem to be singularly focused on inflation.”

2, A Longer Ukraine War Adding Support for Gold

The war in Russia seems to have reached a stage where there is little sign that peace or even a ceasefire can be expected in the short term.  Russian President Vladimir Putin said on Tuesday peace talks with Ukraine had hit a dead end, signaling that the war could grind on for longer, and adding further support for gold.  

Precious metals prices have remained high despite other commodity prices hitting resistance. Worries have also arisen that the Russian central bank has pegged the ruble to gold, another catalyst for higher gold prices.  On March 25, The Russian central bank said that it would pay 5,000 rubles ($52) per gram of gold, allowing the USD/RUB to garner an exchange rate of ~96.15 (5,000/52). 

3, Gold Exploration Industry Seeing Increased Activity in Q2 2022

Early April saw a flurry of activity in the gold mining and exploration sector.  While investors have been pondering the direction that gold prices will take, gold companies have made large moves, perhaps anticipating growing demand in the near future.

Barrick Gold (TSX:ABX)(NYSE:GOLD) optioned 80% of the Pic Project near Lake Superior from Hemlo Explorers.  Barrick signed an earn-in agreement for 16,800 hectares of Hemlo’s Pic Project, located 25 km west of Barrick’s Williams Mine.  Hemlo Explorers Inc. (TSXV: HMLO) stock price jumped more than 53% immediately after the announcement.

Not to be left behind, fellow major miner, Newmont became the sole owner of Yanacocha gold mine in Peru.  Newmont (NYSE: NEM) (TSX: NGT), the world’s largest gold miner by output, announced that it is buying Sumitomo Corp’s 5% stake in the Yanacocha mine in Peru for $48 million making of the company the sole owner and operator of the impressive gold mine, located in the Cajamarca region in Northern Peru.

In other small cap news, Fury Gold Mines announced that it raised $9 million for the Eau Claire gold project’s exploration activities. Fury entered into subscription agreements with two parties for the fund raising, a Canadian corporate investor and a US institutional investor, for the sale of 13.75 million shares at a price of US$0.80.

Will Small Cap Exploration Gold Stocks like Newrange Gold Corp. Benefit?

Newrange Gold Corp. (TSXV: NRG, US: NRGOF, Frankfurt: X6C) is a mining exploration company focused on district-scale precious metals projects in Nevada and Ontario.  The company has recently tweeted progress of their exploration activities in Ontario:

Disclaimer: The company described in this article is a customer of NAI Interactive Ltd. This material is for informational purposes only and is not intended as a recommendation or offer or solicitation for the purchase or sale of any securities or financial instruments, or for transactions involving any financial instrument or trading strategy.

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