According to the analysts, the mining sector appears attractive because it is expected that the price of gold and silver will continue to rise due to the unprecedented action by the US Federal Reserve. The Fed launched an unlimited quantitative easing program earlier this week.
This led to a sharp surge in gold, which even tested resistance just below $ 1,700 an ounce. While the recent highs could not be held, an ounce of the yellow metal still costs well over $ 1,600.The current market environment of the current year with interest rates close to zero, great uncertainty in the markets and constant liquidity injections represent a very positive configuration for gold and silver, according to CIBC. When the dust settles, you can expect a rather quick rebound.The experts indicated that the relative valuation in the mining sector is attractive. The mining companies are currently valued favorably in historical comparison – significantly cheaper than before the start of the corona crisis.
These optimistic comments coincide with announcements by many mining companies that they will mine to shutdown to comply with government lock-down orders. (We reported) However, CIBC believes companies are well placed to cope with the loss of production . Most companies that are observed should be able to survive lower production at current but also lower gold prices without significantly impacting the balance sheet.