Canada's main stock index registered a gain on Tuesday, as gold miners liquidated their positions in bullion as investors await signs of progress on a new U.S. stimulus bill.
While gold appears to be forming a base and analysts expect that it rebounds from here, 2021 is expected to continue to be a strong year for the precious metal. Gold stocks and mining stocks of junior gold miners tend to outperform gold in a rebound. This is fuelling interest in gold futures and ETFs, which otherwise have been trending down since the beginning of the year.
However, gold bulls saw an opportunity when the lustrous metal dipped below the $1800 level to reach $1784.60, before recovering above that level on Friday. Renewed buying drove gold prices over 1.13% higher on Monday to reach $1840.60 an ounce on optimism that a bottom may be in place for the metal.
Several mid-tier and junior gold miners are now down 30% from their highs, while others like Pure Gold Mining (OTCPK:LRTNF) finally joined the (-) 25% from the 52-week high club. Heading into December, the mining stock has come back to more reasonable levels relative to peers vs. extreme overvaluation previously. Therefore, while the stock could recover sharply if we see some bids return to the gold (GLD) market.
Other gold mining and exploration companies are revving up exploration and production in an attempt to capitalize on the expected climb in the price of gold. AngloGold Ashanti (NYSE: AU) (ASX: AGG), Gold Fields (NYSE: GFI), Harmony Gold (NYSE: HMY), Kinross Gold Corporation (TSX: K) (NYSE: KGC), and Fury Gold Mines (TSX: FURY) (NYSE: FURY) are among the companies expanding their projects.
As gold companies prepare for a big year, these mid-tier and junior gold miners have positioned themselves for growth with an aggressive exploration plan in place. They are also supported by experienced management and technical teams that hail from major mining companies. Additionally, analysts continue to knuckle down on their bullish predictions for the gold industry in 2021.
Following the sharp correction in gold prices this month, many analysts pinpoint that many of these mining stocks are extremely undervalued. This creates a lot of buying opportunities.