What happened
Silver and gold stocks soared higher in Wednesday afternoon trading. Here is where shares of three mining companies stood as of of 12:20 p.m. ET:
- Hecla Mining (HL -3.63%) is up 12%.
- First Majestic Silver (AG 2.06%) is passing 12.7%.
- Harmony Gold (HMY 3.32%) is leading the precious metals sector higher with a 15% gain.
This is not a surprise.
Image source: Getty Images.
So what
As precious metals data source Kitco.com reports, both gold and silver prices are marching higher on Wednesday. Indeed, at $24.22 per ounce, silver prices just hit a new seven-week high, and are moving back toward prices last seen in November 2021.
Likewise for gold. At $1,842.40 per ounce, gold is moving higher, too, and approaching its November highs.
Inflation, of course, is the culprit (or the hero, depending on your perspective). Inflation rates in the U.S. hit a 39-year high last week if you recall, and overnight, the United Kingdom reported its highest inflation rate in 30 years of 5.4%. This trend is driving investor demand for "hard currencies" such as precious metals -- the kind that tend to gain value when fiat currencies like the dollar lose it.
Now what
In Kitco's estimation, this trend will have legs, because "the inflation threat continues to grow." And investors in precious metals miners probably think this will be good news for their stocks -- but there's another threat they should bear in mind as well.
At 137 times trailing earnings, Hecla Mining stock looks awfully pricy right now, no matter how expensive silver and gold are getting. First Majestic Silver isn't quite as bad at a valuation of nearly 69 times earnings, but I have to say that even that looks kind of expensive.
In contrast, Harmony Gold stock at seven times earnings looks more than a little enticing if gold prices continue to soar. Harmony offers the added benefit of paying its shareholders a 2.5% dividend yield -- versus the 0.5% yield at Hecla, or the meager 0.1% payout at First Majestic.
If I were looking to pick up some cheap silver and gold stocks right now, I think Harmony Gold Mining Company might be the place to start.
