Gold prices just poked their head above long-term resistance at $1,800 an ounce at the end of June. And a breakout for silver could be coming as well, asserts Mike Larson, editor of Safe Money Report.
Can this trend continue? Well, interest rates are stuck near zero percent and will be for as far as the eye can see. The chance of them falling below zero is much greater than the chance of them soaring above it.
You also have more aggressive, broad-based central bank buying to add to reserves in the last couple of years. Plus, you have an increasing amount of money flowing into the sector. Gold ETF inflows hit $8.5 billion in May alone.
That was up 4% from a year ago, pushing 2020 inflows to the highest level in history. So, yes, there’s a high likelihood the outperformance we’ve seen for the past several years will continue for at least a couple of years more.
We are now adding a new metals position to our model portfolio — Toronto-based Yamana Gold (AUY), a miner with a mix of production, development and exploration-stage properties in Canada, Brazil, Chile and Argentina.
It is currently on track to produce 786,000 ounces of gold and 10.25 million ounces of silver this year. Unlike one-mine junior companies or other high-risk entities, Yamana has a portfolio of projects with many years of life yet.
Further expansionary projects are underway at all of them, too. The company is also exploring several other properties in Canada and Brazil, with a goal of adding 1.5 million gold equivalent ounces in new inferred mineral resources over the next three years.
What about income? Mining companies don’t pay very generous dividends as a general rule. Or, at least, they haven’t for some time due to the multiyear bear market in metals. But that’s starting to change now that prices are on the rise again.
Yamana has raised its payout three times in the past year, for instance. That’s good for an indicated yield of 0.9%. Buy AUY at the market.
