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Why Alamos Gold, Gold Fields, Endeavour Silver, AngloGold Ashanti, and More Precious Metals Stocks Rallied Today

What happened

Shares of precious metals miner Alamos Gold (NYSE: AGI) rose as much as 11% at one point on Jan. 19. Posting even stronger gains were Endeavour Silver (NYSE: EXK), AngloGold Ashanti (NYSE: AU), Gold Fields (NYSE: GFI), and SilverCrest Metals (NYSEMKT: SILV), which reached peaks of around 12%, 12.5%, 13%, and 13.5%, respectively. All were still fairly close to their daily highs at roughly 3:30 p.m. ET.

There wasn't any particular news out of the companies that would have precipitated these across-the-board stock gains. That said, AngloGold Ashanti did announce it had completed the acquisition of Corvus Gold on Jan. 18. But that really had little to do with today's stock pop. The reason for the broad price moves for these gold and silver miners, and many others, was much bigger.

Image source: Getty Images.

So what

The simple reason for the advances here is that gold and silver prices were both higher today. As miners, Alamos Gold, Endeavour Silver, AngloGold Ashanti, Gold Fields, and SilverCrest Metals all benefit from higher precious metals prices. Notably, because of the cost structure inherent in the mining business, once a company's mining expenses are covered, most of the profit falls to the bottom line. So, in some ways, miners are a leveraged play on the commodity moves of the metals they produce. That helps explain why gold rising around 1.5% or so and silver increasing by around twice that much led to 10%-plus gains for miners.

That said, the reason for gold's advance today appears to be driven by worried investors seeking out safe-haven investments. Some of the troubling news in the world right now includes central banks increasing, or at least talking about increasing, interest rates; the inevitable impact that will have on bond prices and economic growth; stock price volatility, noting yesterday's big U.S. market decline; and the not-so-subtle issue of regional tensions that appear to be heating up. Prices for a lot of different types of assets are in flux right now.

Today specifically, gold hit a two-month high as bond yields fell and the value of the U.S. dollar weakened. But, again, the story is likely that investors are increasingly uncertain about the future and, thus, are seeking out someplace safe for their cash. That's a role that gold and, to a lesser extent, silver have traditionally played on Wall Street.

Now what

Investors shouldn't get too caught up in one day's gains here, particularly since gold and silver, as well as the miners that dig them up, have a history of price volatility. Indeed, it wouldn't be too shocking to see investors turn around and be in a selling mood tomorrow. However, if you share the broader concerns that appear to be driving the prices of precious metals miners like Alamos Gold, Endeavour Silver, AngloGold Ashanti, Gold Fields, and SilverCrest Metals today, you might want to consider, instead, streaming and royalty companies like Royal Gold and Wheaton Precious Metals. These companies offer exposure to precious metals, but because they aren't actually miners tend to have more stable businesses.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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