The gold price has declined about 1.5%, pulling back for a second week as the market continues to lock in gains from the yellow metal’s large rise.
Gold is currently trading at US$2,327 ($3,514) with the retreat in the precious metal coming as weak US employment data increases hopes for near-term rate cuts, driving up riskier equities.
According to the Canadian Mining Report, gold producers were almost all down and large TSX-V gold was mixed amid the price pull back, with Snowline Gold (TSX-V:SGD) and Laurion Mineral Exploration (TSX-V:LME) notable domestic mentions.
The report details, however, there has been a shift of the market into gold stocks in recent months, which it says is ‘evident in statistics for the TSX-V’.
In particular, the TSX-V Mining Top 200 is touted as a reasonable proxy for the mining sector overall as it accounts for more than 80% of the market cap and remains in a “relatively tight range” from 83% to 86% since December 2023.
“While in 2021 and even well into 2022 the lithium sector had actually challenged gold’s dominance of the top 200, the latter has clearly moved back into the lead this year. Gold was just 37% of the top 200 market cap as of end-December 2023, but rose to 45% by February 2024 and has stayed near that level since,” the report says.
“This mainly came at the expense of the lithium sector, which was 27% of the top 200 in December 2023 but had dropped to 16% by February 2024.
While this was partly because one major lithium stock, Patriot Battery Metals (TSX-V:PMET), graduated to a TSX listing, most of the decline was from a plunge in the market cap of Sigma Lithium (TSX-V:SGML), by far the biggest TSX-V lithium stock and largest TSX-V mining stock.
The other sectors have remained a reasonably steady proportion of the top 200, with moderate increases in the silver, uranium, royalty, and other segments of the top 200.”
In absolute terms from December 2023 to early May this year, the Canadian Mining Report says the value of the gold sector in the top 200 had risen from C$12 billion ($13.29 billion) to C$13.4 billion, while lithium was reduced by half to C$8.6 billion.
Copper edged down slightly to C$2.9 billion, while silver rose C$200 million to C$2.2 billion while the uranium sector has grown steadily in 2024 from C$2.1 billion to C$2.7 billion.
This week, the report assesses mining stock valuations versus major global markets and sectors, with mining P/B ratios overall quite flat in 2024. However, it suggests gold stock multiples are increasing and recent equity raising for Canadian mining remains robust.
“Gold stocks dropped with the GDX down 3.2% and GDXJ declining 3.8% as a second week of decline for the metal finally saw the stocks capitulate after holding up last week, offsetting the move into riskier equities including small caps,” the report adds.
“Even given this recent short-term move back into risk, the trend overall for 2024 has been a shift more towards safety. While the jump in gold and gold stocks is evidence of this, it is also shown by the rise in US utilities.”
According to the report, utilities are widely considered one of the most defensive sectors and are up 9.4% this year, outpacing the 7.4% gain in the S&P 500.
While the tech giants (Facebook/Meta, Apple, Netflix, Google/Alphabet) – which the report refers to as FANG stocks – are up 16.7% and still lead the market, the gains were mainly in January.
A major turning point for the market would be utilities outpacing the FANG stocks, “indicating an end to risk-heavy tech euphoria” and an upward rerating of safer assets, the report continues.
Write to Adam Orlando at Mining.com.au
Images: Supplied & Canadian Mining Report
