Ever since Russia invaded Ukraine, many investors have been focused on spiking oil prices. However, while crude oil reaches decade highs, another commodity is also seeing prices rise significantly. Metals have been gaining rapidly, with gold and silver reaching more than $2,056 and $26 per ounce respectively as of this writing. These trends are to be expected. When anxiety is high on Wall Street, investors focus on gold as a safe investment for turbulent times. As such, metal stocks could be in for the same type of growth we saw from oil stocks last week.
Today is off to an excellent start for metals stocks that were already rising. The current mining boom could be what pushes several companies out of the penny stock category. For example, Northern Dynasty Minerals (NYSEAMERICAN:NAK) has been surging all morning. As of this writing, it is up more than 13% for the day. Likewise, Aqua Metals (NASDAQ:AQMS) is up 18%. Meanwhile, Polymet Mining (NYSEAMERICAN:PLM) is up more than 40%.
That’s not all. TMC The Metals Company (NASDAQ:TMC), a name known for its legal controversy, has also been spiking. It is up over 42% for the day. Finally, Hycroft Mining (NASDAQ:HYMC) has surged by an impressive 160%-plus.
What’s Happening with Metals Stocks?
Right now, all five of these names are still rising steadily and show no signs of slowing down. The question remains, though: for how long? These price spikes aren’t driven by organic supply and demand; they’re driven by fear. The price of nickel more than doubled today, reaching $100,000 per metric ton. This was quickly followed by a report that the London Metal Exchange (LME) would be suspending nickel trading, of which Russia is the world’s third-largest producer.
According to analyst Carsten Menke of Julius Baer, further conflict is likely to continue driving prices upward. He also noted that palladium would “likely have a more lasting impact, as it could push the world economy towards a stagflation scenario.” Analysts would regard such an outcome as highly bullish for gold prices. Further, this type of action would be excellent for all metals stocks, as it would continue driving positive market momentum.
Of course, the small-cap companies in this space can be difficult to evaluate. Widespread market momentum can send names across a sector shooting up. But this raises some questions as to the sustainability of their growth. As noted, names like TMC have a checkered past as well, wrought with environmental concerns and legal battles.
That said, InvestorPlace contributor Josh Enomoto has also noted that Aqua Metals has “exceptional implications for a possible green future” with its battery-recycling technology. It’s worth noting that nickel is a key component for electric vehicle (EV) batteries as well. To that end, Polymet has mining operations in the same state as Talon Metals (OTCMKTS:TLOFF). Talon is a nickel miner that signed a deal with Tesla (NASDAQ:TSLA) earlier this year.
What It Means
While assessing Hycroft Mining recently, InvestorPlace contributor Joel Baglole noted that “over the long term, the share price should be expected to normalize as prices move lower and stabilize once again.”
If that holds true, we will see all metals stocks that have spiked so far come down as smaller metals tend to follow gold. As such, a key element for investors to profit from the current metal boom will be picking which metals stocks have the most utility in normal times, when supply and demand forces are driving markets.
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On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.