Editor’s note: Anthony Mirhaydari is filling in for Serge Berger for today’s “Beat the Bell” column.
The inflation trade is on.
Since Federal Reserve chairman Janet Yellen confirmed the money pumping would continue with aplomb last week, despite bubbling inflationary pressures, traders have piled into silver and gold stocks in search of protection.
Protection, that is, from the diminishing purchasing power of the dollar.
Gold enjoyed its best one-day gain since September on Thursday, lifting the list of precious metals stocks I recommended back on June 12. Included on the list were names like SilverCrest Mines (SVLC) and Primero Mining (PPP), which are up 22% and 12.8%, respectively, since then.
More gains are coming. Why? Because the Fed is holding short-term interest rates too low. A simple Taylor Rule analysis, which tries to formalize monetary policy by setting interest rates based on where the economy and inflation are, suggests interest rates should be at 1.8%, not 0%. The more inflation rises, the wider this gap will become … and the wider the gap becomes, the faster inflation will rise.
As a result, silver and gold stocks have much more upside to come, which sets the stage for powerful rallies in the beaten down mining stocks in the sector. Here are five more worth watching.