The U.S. dollar is under pressure, falling out of its recent trading range to test its 2011 lows.
There are a couple of reasons behind this activity. A recent weakening of the economic data — such as the disappointing September jobs report and the flash manufacturing PMI — has Federal Reserve officials pledging to hold off on tapering its ongoing $85 billion-a-month bond purchase program until early 2014.And Chinese officials are once more worried about rising inflation. They’re tightening the short-term money markets in response, which is pushing up China’s yuan in a big way.
As a result, gold and silver stocks — an area that’s been left for dead since 2011 — are pushing strongly off of a double-bottom pattern. Here are three picks worth considering:
IAMGOLD operates five gold mines throughout Africa and the Americas. The company is profitable, but has seen margins pressured by the two-year decline in gold prices. The company has shuttered higher-cost facilities, and is set to bring a refurbished mine in Quebec back online to boost production by 130,000 ounces next year.
Shares are poised to retake the 50-day moving average for the first time since August and up 13% since I added IAG to my Edge Letter Sample Portfolio on October 17.
Paramount Gold and Silver (PZG)
Paramount is an expiration-stage company with projects in Nevada and Mexico. The Nevada property alone is expected to produce 172,000 ounces of gold and 263,000 ounces of silver per year for 17 years.
Shares have been basing since May, mired in a tight trading range since late September and are now breaking out to challenge their 50-day moving average. A return to the August high would be worth a 25% move from here.
I am adding PZG to my holdings.
Hecla Mining (HL)
Hecla operates the largest silver mine in the United States — the Greens Creek asset in Alaska that has been in operation since 2011. The company has also been on the acquisition trail, recently completing its purchase of Aurizon Mines.
The company is expected to return to profitability in Q4 ’13 or Q1 ’14 as revenues grow from $81 million in 2012 to an estimated $159 million in 2014.
Shares have been sliding sideways since April, but have popped over their upper Bollinger Band with good momentum. A test of the 200-day moving average would be worth a 10% gain from here. I am adding HL to my holdings.
Disclosure: Anthony has recommended IAG to his clients.