The S&P/TSX Composite Index has managed to partly bounce back from the global stock market crash experienced in March. This was triggered by the COVID-19 outbreak, which inspired governments to pursue stringent lockdowns.
Jobless claims have exploded in the United States and Canada, putting entire sectors have been put at risk. Meanwhile, one sector has managed to thrive in the face of volatility.
Market crash: Investors are flocking to safe havens
Investors have turned to safe havens in a bid to protect themselves from another market pullback. Precious metals and cryptocurrencies have once again battled for supremacy in this space. In late 2019, I’d suggested that investors should bet on gold rather than Bitcoin or any other digital currency.
Gold has already hit a seven-and-a-half year high on the back of this volatility. In late February, I’d suggested that the yellow metal had the legs to hit the $2,000 mark if conditions worsened.
Indices have bounced back due to aggressive stimulus packages, albeit volatility could easily return. The return of a stock market crash has the potential to push even more people into the arms of the oldest safe haven.
Why gold can rise even higher
A stock market crash is not the only thing that has propelled gold in 2020. Precious metals had a terrific run in 2019 as central banks turned back to monetary easing.
Trillions are being spent worldwide to prop up economies and the finances of individual citizens. Some investors are turning to gold as an alternative store of value over the dollar.
These last few months have taught us how quickly things can change in a civil society. Because of this, some investors are pursuing peace of mind by holding a tangible store of value. Meanwhile, gold mining stocks have started to run wild.
Yamana Gold was up 3.92% in early afternoon trading on April 16. The stock has surged 56% month over month at the time of writing. Yamana is one of the largest gold producers in Canada.
On April 14, Yamana announced that the joint operation with Agnico Eagle Mines at the Canadian Malartic mine will resume operations.
Investors can expect to see Yamana’s first-quarter results at the end of April. Yamana and other top producers will undoubtedly see an improvement to their bottom line on the back of higher spot prices.
Barrick Gold is the second-largest producer in the world. Its shares have thrived in the face of the global stock market crash. Barrick stock had climbed 58% over the past month as of early afternoon trading on April 16.
The company recently announced that its first-quarter output was on pace to meet its 2020 guidance. Sales in Q1 reached 1.22 million ounces of gold and 110 million pounds of copper.
The average market price for gold was $1,583 in the first quarter. For reference, the spot price of gold was at $1.735 at the time of this writing. If these new prices establish a solid floor, Yamana and Barrick stocks will challenge new highs.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned.