With gold prices pushing above $2,000 and rising about 10% for the year, it’s giving gold miners as well as explorers reason to pool their resources together via mergers or acquisitions.
A confluence of factors have been in gold’s favor as of late, including inflation pushing down the value of the dollar and recession fears sparking a flight to safe haven assets like precious metals. As such, the price of gold is up over 50% for the last five years.
Nonetheless, there haven’t been as many mergers or acquisitions compared to other metals, according to a Forbes article. That could change given the recent uptick in gold prices, especially if demand continues to push higher.
“We may be about to enter a new golden age of gold mining deals as explorers and producers seek to capitalize on higher metal prices and gain exposure to other key minerals, including copper, at a time when consolidation in the gold industry vastly trails that of other metals,” the article said.
“Higher gold prices in recent years have not resulted in significantly increased exploration spending. In lieu of that, companies can expand and create shareholder value through mergers and acquisitions (M&A),” the article added.
Get Gold Mining Exposure Amid Bank Jitters
Adding to the safe haven scramble for gold is the recent bank collapses. Declining faith in the financial system is pushing investors towards more gold and could have a spillover effect on miners.
As such, investors should be aware of the Sprott Gold Miners ETF (SGDM). As mentioned, if demand continues to rise for gold, this can have a domino effect on miners, which can provide indirect exposure to rising gold prices.
Per SGDM’s fund description, the ETF seeks investment results that correspond generally to the performance of its underlying index, the Solactive Gold Miners Custom Factors Index. The index aims to track the performance of larger-sized gold companies whose stocks are listed on Canadian and major U.S. exchanges.
It’s an opportune time for investors to get exposure to alternative assets like gold. Banking jitters only add to the recession fears, warranting portfolio diversification with assets like gold.
“During the GFC, >150 banks went out of business vs ‘only’ 4 failures today, but those bank failures today already equate to all the assets financial institutions held during the 2008-09 banking,” said MKS PAMP’s head of metals strategy Nicky Shiels in a Kitco News article. “More bank failures and thus more policy backstops & bailouts accelerates the 60/40 portfolio rethink and the need for some alternative asset exposure.”
For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.