Gold and silver (as well as their miners) have been on an incredible multi-year run. Despite the recent correction across the precious metals scene that has tarnished (please forgive the pun) investor enthusiasm, I still think there’s an opportunity to be had in the space, especially as most other investors (many of whom are only in it for the share price momentum) move on to other opportunities.
Of course, chasing momentum as it comes back online for gold and silver markets could be a risky move, especially since commodities can turn at the drop of a hat with a magnitude that’s comparable to the run in the rearview. For the most part, though, the debasement trade and central bank buying activity across the world paint a longer-term picture for gold and silver.
For the miners, which have operational torque due to leverage, that could mean amplified gains. But, of course, many of the more junior miners (higher risk, higher reward) have already appreciated by so much. And the big question moving forward is whether the gains can continue or if the latest bump in the road is a turning point.
With oil prices soaring due to the conflict in the Middle East and rate hike fears taking things up a notch or two in recent weeks, it should be no mystery as to why the prices of gold and silver have been down in recent weeks. Of course, the debasement trade and hefty U.S. debt load are still major macro factors that could pave the way for a continued march higher. But until there’s a resolution to the conflict in the Middle East, rate-hike fears might be what causes a bit of cooling in gold and especially its miners.
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Avino Silver & Gold Mines
So, when it comes to the hotter miners, like Avino Silver & Gold Mines (TSX: ASM), which pretty much rose on the TSX Index seemingly out of nowhere, investors should expect extreme volatility in both directions. For the gold and silver believers who view extreme volatility as a feature rather than a bug, I think such mid-cap miners could be the play.
Of course, not everybody is going to have a strong enough stomach, especially since the shares are off more than 41% from their highs. Even with the recent plunge, shares are still up by more than 1,000% from the 2023 and 2024 lows. Indeed, from a penny stock to an established mid-cap, Avino looks intriguing if you want serious operational leverage to profit from a potential next leg higher in gold and silver (silver really tends to explode higher).
With several big banks calling for more upside in silver and gold, I do think betting against Avino is a bad idea. Personally, I’d be more comfortable with a diversified gold ETF unless, of course, you’re looking to further your diversification to some choppier, growthier kinds of plays to bet on the multi-year run in gold and silver prices.
Undoubtedly, the multi-year run in gold and silver has contributed to the magnificent gains in shares of Avino. Beyond that, though, the firm has done a lot of things right at the operational level. If precious metals (and other metals, like copper) keep moving higher, the stock also stands to keep winning.
However, if there’s pain in the cards for precious metals and rate hikes on the table, perhaps it’s too soon to be a buyer. Perhaps those keen on the name could nibble steadily over time to deal with the intense volatility in such a fast-moving miner.
