3 Mining Stocks to Own When Gold and Silver Prices Rise

When companies operate in a commodity-dependent sector, such as construction and energy stocks, their stock price swings are a little wilder and more cyclical as their underlying products move in and out of demand. Today, the return of precious metals, driven by hopeful speculation on the Federal Reserve’s proposed interest rate cuts, could put mining stocks back on track.

Investors’ attention is focused on the most commonly observed – and traded – precious metals on the market: gold and silver. As the price of these commodities has seen a sudden rally over the past two quarters, there are reasons to believe that some stocks exposed to these metals are set to embark on a new bull run, fueled by willing investors and Wall Street analysts.

Stick around and find out why the names are popular Hecla Mine NYSE:HL, MP Materials NYSE: MPand even Pan American silver NYSE: PAAS are at the top of the list as companies that could see double- and even triple-digit increases in earnings per share. Of course, you have to understand why looking into the industry is an interesting move today, so here’s why.

Behind the scenes

Where exactly is the commodity landscape today? You can turn to the Bloomberg Commodity Index to get a good idea. According to this chart, the index is at a new 52-week low price, meaning that commodities are relatively inactive when it comes to interest for investors and traders today.

However, not all commodities are created equal as some within this index are primarily responsible for the decline, while others are starting to break out aggressively. Which is which?

Oil prices have struggled to break out of the $75 to $80 per barrel range, which is a shadow of the nearly $120 per barrel reached in 2022. Falling as much as 37% over the cycle, oil can be blamed of some of the underperformance shown by this commodity index.

Checking the SPDR Fund Energy Select Sector NYSEARCA: XLE, you’ll notice that it has also underperformed the broader S&P 500 by about 27% over the past twelve months; check this is the lag in the industry, so how about metals?

Comparing the half-yearly performance of the energy sector with that of SPDR S&P Metals & Mining ETF NYSEARCA: XMEyou’ll see that mining stocks have outperformed energy stocks by up to 11% during this period, which is a testament to how bullish markets have turned surrounding miners into a boom in precious metals prices.

So while the overall commodity index is down for the year due to the past capital cycle, you now know that precious metals are starting to outperform the cycle to outperform other major energy commodities. Here’s how you can ride this wave.

Complete menu

From October 2023 to today, gold has gone from around 1,650 dollars an ounce to reaching 2,080 dollars; that’s a 26% increase in just two quarters! Silver has a history over the same period, as it went from around $21 an ounce to $23 an increase of almost 10%.

Wall Street analysts think this is just the beginning; How can you be sure? Check out the earnings per share projections for the mining stocks on this list. Hecla analysts see 700% EPS growth, which may seem crazy until you discover that the majority of this company’s revenue comes from silver.

As silver has rallied less than half as much as gold, analysts are betting Hecla will rise as much as 74% from today, as they set a price target of $6.50. This is all due to silver’s need to catch up to gold as they are sister commodities.

For MP Materials, which derives its business from the extraction of rare earth oxides such as neodymium-praseodymium that enable renewable energy generation and electric mobility for electric vehicles (EVs), analysts see the writing on the wall for the next round of low interest rates to bring back demand for these industries.

This is why they expect 114% EPS growth next year and a 74% upside to their stock price target of $26.8; Now that’s something to be excited about.

Last but not least, here’s what Pan American Silver can offer. With most of its trades focused on silver, this is another direct move you can consider with the thought of silver catching up with gold in the coming months. Analysts expect EPS to rise 262% over the next year, accompanied by a stock price target of $20.40, implying an upside of 58%.

While these metals themselves could rise 10-20% over the next cycle, knowing what you know now, you can better improve your performance from the bottom of precious metals prices.

Before you consider Pan American Silver, you’ll want to hear this.

MarketBeat tracks daily Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Pan American Silver wasn’t on the list.

While Pan American Silver currently has a “Moderate Buy” rating among analysts, top analysts believe these five stocks are better buys.

View the five stocks here