Canada’s main stock index opened higher on Wednesday and was able to offset some of the losses from its worst day in two weeks in the previous session. Gains in gold stocks and silver stocks of Canadian mining companies were largely responsible for the change in direction.
In the month leading up to the US Presidential election and with a worsening second wave of COVID-19 infections, gold is now back in the safe haven spotlight like never before. As a result, investors are swiveling toward Canada, where the makings of a gold boom are just getting started.
A major rush to gold stocks and silver stocks is leading to a surge of investor interest in exploration companies and junior gold miners, in particular. Although these are riskier to pour money into, they are also potentially the most lucrative.
Liquidity is now moving in major waves into the junior gold-mining sector. Consecutively, the next big gold discovery is set to breed another round of millionaires, if not billionaires.
Silver stocks and gold stocks of Canadian junior mining companies have a 14% weighting on the Canadian benchmark, up from almost 9% last year. That’s the biggest year-over-year increase since 2008, according to data compiled by Bloomberg.
Among the best silver stocks and best gold stocks this week, we see the addition of several new names such as Fortuna Silver Mines Inc., New Gold Inc., Osisko Mining Inc., Endeavour Silver and Amex Exploration. Endeavour Silver, Fortuna Silver Mines, and even New Gold, have large amounts of silver reserve assets. Silver has slightly outperformed gold as a commodity since the start of the year, but the recent drop has been more significant for owners of silver assets.
At the same time, the S&P/TSX Materials Index, which tracks more than 30 Canadian mining companies, has surged 32% this year -- making precious metals the second-best performing sector in Canada -- on strong gold and silver prices. Experts attribute the rise to a weakening U.S. dollar, plunging real rates and geopolitical tensions, all of which have motivated investors to seek shelter in precious metals.
Several junior gold miners such as Starr Peak (TSX:STE.V; OTC:STRPF) were able to gain exposure after buying up neighboring properties close to the major gold find of Amex. Investor enthusiasm has never been higher, and that is likely to lead to a great deal of exposure once companies identify their drill targets and line up their campaigns. Or even before that, every time Amex releases positive new drill results creeping up to the border with other junior miners.