What happened
The shine from precious-metals stocks faded quickly on Monday, with some stocks from the industry crashing hard as the day progressed. Here's how much some of the worst-performing gold and silver stocks had fallen at their lowest points in trading during the day:
- Hecla Mining (HL +11.26%) -- down 9.6%
- Endeavour Silver (EXK +12.86%) -- down 11.5%
- Coeur Mining (CDE +6.68%) -- down 10.7%
Gold and silver prices plunged, and so did the prices of these stocks.
So what
Gold and silver prices crashed to lows not seen in two months by midday Monday, according to data from Kitco. While the price of gold fell below $1,900 per ounce, silver dropped below $24 an ounce today.
In fact, Monday mayhem hit the entire metals industry, with prices of commodities from base metals (like iron ore and copper) to precious metals crashing. Although the war between Russia and Ukraine, which sent prices of metals soaring in recent weeks, continues to rage, China is going deeper into lockdowns.
Image source: Getty Images.
This past weekend, China shut down parts of Beijing after having already put other important regions -- including financial hub Shanghai -- under strict lockdowns in recent weeks to stop the spread of coronavirus. China's zero-COVID policy and draconian lockdowns, which are spreading to more provinces, are bound to hit manufacturing activity, consumption, and economic growth, and that includes the consumption of precious metals. China is the world's largest consumer of gold and one of the largest silver-consuming nations.
Meanwhile, with the Federal Reserve hinting at aggressive upcoming interest-rate increases, investor interest in precious metals is fading. To put that into context, the price of gold typically falls when interest rates rise, as the latter makes bonds more attractive as an investment. With selling pressure on precious metals mounting, gold and silver stocks are feeling the heat, as well.
While Endeavour Silver and Hecla Mining are pure-play silver stocks, Coeur Mining is a more diversified player. It derived 70% of its sales from gold and the remaining sales from silver in 2021.
Now what
Shares of Coeur, Hecla, and Endeavour Silver rose steadily this year until last week, when they started to lose steam. With gold and silver prices now dropping off their highs, investors perhaps see little upside left in these stocks.
Yet it's worth noting that all three companies are expected to release quarterly earnings in early May, and numbers from some might impress, given the recent rally in the prices of gold and silver. Hecla Mining, for example, recently revealed its silver production rose 3% year over year in the first quarter. Endeavour Silver, though, reported its Q1 silver production was up 25% year over year.
As for Coeur Mining, its average realized price for gold was only $1,374 an ounce in the last quarter. The price of gold has risen dramatically since then, which should be reflected in the miner's Q1 earnings report.
