The inauguration of President Biden did not put an end to the trend of the U.S. Dollar weakening, as many analysts predicted it would. His proposed billion-dollar stimulus package to combat the effect of the pandemic is expected to plunge the U.S. further into debt. The result would be an even weaker American currency.
What does that mean for commodities and world markets?
Wall Street analysts and experts haven’t been able to roll out consistent predictions for the coming year, in stocks, bonds and metals. Looking towards similar historical occurrences, has prompted some to propose a projected price for gold of $2,300 in 2021. Others draw on the similarity the post-trendline breakdown of gold in 2002/2003.
However, it’s clear from recent market movements that the U.S. dollar is on the verge of an accelerated decline towards 80. Should this happen, the weakening dollar can push gold higher into April/May 2021 before the next 6-month cycle correction. 2002/2003 was the last time when the US economy was coming out of recession, just like now. The recently announced stimulus package, which likely won’t be the last, could deflate the dollar and push hard assets higher.
For Canadian gold miners this could mean increased interest in their gold stock as investors scramble to find another way to preserve the value of their portfolios. Both junior gold miners and lager companies are seeing their mining stocks gain ground. Active stocks in the mining markets this week include First Majestic Silver Corp. (NYSE: AG), Golden Independence Mining Corp. (OTCQB: GIDMF) (CSE: IGLD), Eldorado Gold Corporation (NYSE: EGO) (TSX: ELD), Alamos Gold Inc.(NYSE: AGI) (TSX: AGI), IAMGOLD Corporation (NYSE: IAG) (TSX: IMG).
Eldorado Gold Corporation (NYSE: EGO) (TSX: ELD) has been a popular choice for a mining stock and its recent acquisition of QMX GOLD CORPORATION (TSX-V: QMX) is giving the company a strong advantage. The arrangement is for the value of approximately C$132 million on a 100% and fully diluted basis or C$0.30 per QMX share.
First Majestic Silver Corp. (NYSE: AG) is among the picks of analysts after it announced the Company's fourth quarter and full year 2020 production results. Its production and cost guidance for 2021 expand on the strong year it had in 2020. After adapting to new covid restrictions, the miner was able to outperform in the second half of the year. During the fourth quarter, silver production at La Encantada and San Dimas again exceeded expectations, hitting a six year high. The announced results put First Majestic among the best silver stocks to buy this week.