Despite Rate Cut Delay, Brighter Days Ahead for Gold?

Even as the gold market continues to hover seemingly without finding any traction above US$2,000 an ounce, and the Fed signals it's in no hurry to cut interest rates, some analysts continue to see bright skies ahead this year for the precious metal.

A slim majority of economists polled by Reuters predicted the Fed's rate cuts would come in June, possibly hitting the pause button on big returns for gold buyers. But they also noted that an even bigger risk: The first cut might not come until after that.

Fed Governor Christopher Waller said on Thursday that he was in "no rush" to cut rates, Reuters also reported.

However, Barry Dawes of Martin Place Securities wrote that gold looked "ready to break higher against bonds," and that "gold stock sentiment is close to a bottom" and "should be ready to rally soon now."

"Gold stock investors and speculators have been ground into a pulp over the past few years, but there is still hope for a better future," Dawes wrote on February 24. "Many technical (indicators) are suggesting a breakout is at hand."

Lower interest rates make holding non-yielding bullion more attractive to investors, Reuters noted. It can also be a big boon to gold miner stocks, like some of those suggested below.

Copper and gold are expected to see the largest price boost in the commodities sector from Fed rate cuts, according to a report by Goldman Sachs quoted by Reuters.

"The immediate price boost from a Fed-driven 100 basis point decline in U.S. 2-year rates is the largest for metals, especially copper (6%), and then gold (3%), followed by oil (3%)," the analysts said in the note from Feb. 20.

But ZeroHedge predicted that gold will remain resilient despite any delays from the Fed. It noted that MUFG, Japan's largest bank, released a recent report maintaining its price predictions for the metal, "the only bank of this size to put this type of research out after a selloff while maintaining (its) price target."

Central bank demand and geopolitics also contribute to its bullish view on gold, the site said.

"We acknowledge downside risks to our constructive (US$)2,350/(ounce) year-end forecasts but remain constructive on bullion this year," the site noted.

On his website, Addicted to Profits, David Skarica said he sees similarities with earlier gold markets and predicted the precious metal will rise in value "sometime this year."

"The closer we inch to seeing those rate cuts finally happen, the gold can finally see that breakout," he said.

Rick Mills, author of the Ahead of the Herd newsletter, noted that media coverage of any bullish gold advances will compound its momentum.

"The biggest beneficiaries of that will be the gold miners' stocks, which are dirt-cheap and mostly forgotten today," Mills wrote. "That leading GDX gold-stock ETF can more than double during major gold uplegs! And smaller fundamentally superior mid-tiers and juniors well outperform GDX majors."

There are many companies worth looking at worldwide as we wait for a move in gold. Here are a few.

Soma Gold Corp.

Soma Gold Corp. (TSXV:SOMA;OTC:SMAGF;WKN:A2P4DU) owns two mines in Antioquia, Colombia, which have a combined milling capacity of 675 tonnes per day. Its El Bagre mining complex produced 23,800 ounces of gold in 2022 and 32,340 ounces of gold in 2023, and its Limon Mill is available to restart production when production from its Cordero Mine (part of the El Bagre mining complex) reaches capacity. Soma Gold's other project, Nechí, consists of the El Catorce, Santa Elena, and Santa Maria deposits.

Technical Analyst Clive Maund wrote in January that Soma's large land holdings in a gold-rich district "hold out the strong possibility of additional discoveries of high-grade ore."

A sharp dip in the company's stock that month due to a temporary stepdown of its CEO and lagging precious metals' prices "is viewed as presenting an excellent opportunity to buy the stock at a good price."

The company said it plans to yield 40,500 ounces gold in 2024 and plans to continue exploration with drilling at its Cordero Mine.

Headquartered in Vancouver, Soma Gold Corp. has a market cap of US$41.11 million and trades in a 52-week range of CA$0.30 and CA$0.74. 

According to Reuters, 19.27% of the company is held by management and insiders. CEO and Chairman Geoffery Hampson has 18.27% and 0.56% through his wholly owned company Lake Forest Development Corp., Vice President Jean-Francois Meilleur has 0.52%, Director Glenn Walsh has 0.31% directly and 44.07% through his wholly owned company, Conex Services Inc., and CFO Greg Hayes has 0.12%.

2.26% is with strategic investors.

0.70% is with institutions. Palos Management Inc. has 0.27%, and Marmite Capital AG has 0.33%. The rest is with retail investors. 

Dakota Gold Corp.

Dakota Gold Corp. (DC:NYSE American) is exploring the 46,000 acres it has acquired and consolidated over the past decade surrounding the Homestake Mine, including its Richmond Hill and Maitland projects.

Once called the "Richest 100 Square Miles" on Earth, Homestake was discovered in 1876 and consolidated by George Hearst. Over 126 years, miners extracted 41 million ounces (Moz) Au and 9 Moz silver (Ag) from the site. Industry giant Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) also backs Dakota Gold.

The company recently announced assay results that continued to grow its Richmond Hill project's resource, which is expected to have a maiden resource estimate in Q1 2024.

Just last month, Dakota Gold announced another big find at Richmond Hill: important rare earth elements (REEs) vital to the new clean energy economy that could open new economic opportunities for the company.

Dakota Gold President and Chief Executive Officer Jonathan Awde said the discovery may reduce permitting timelines and help the company reach new investors.

REEs are used for everything from purifying water to MRIs, fertilizers, weapons, scientific research, wind turbines, computers, and permanent magnet motors for electric vehicles (EVs). Developing a new mine can take years, and China has been escalating a standoff with the West.

"The U.S. Department of Defense and Department of Energy are prioritizing REEs," analyst Michael Gray of Agentis Capital wrote in a January 31 research note.

According to the company, approximately 25% of its shares are with management and insiders.

Out of management, Co-Chairman Robert Quartermain holds the most shares at 8.51% or 7.38 million shares, President and CEO Jonathan Awde is next at 6.8%, with 5.93 million shares, while COO Jerry Aberle holds 4.9%, with 4.21 million. The remainder of the 25% is held by other members of management and the board of directors.

About 26% of the shares are with institutional investors, according to Yahoo Finance and Edgar filings. Top institutional holders include Fourth Sail Capital with 5.33%, Van Eck Associates with 4.02%, Blackrock Institutional Trust Co. with 3.69%, The Vanguard Group Inc. with about 3.19%, Fidelity Management and Research Co. LLC with 2.74%, and CI Investments, Inc. with 2.66%.

About 16.5% is with strategic investors, including Orion Mine Finance which owns about 7.7% and Barrick Gold Corp. (ABX:TSX; GOLD:NYSE), which owns about 3%. The rest is retail.

Dakota Gold has a market cap of US$178 million, with 99.9 million shares outstanding. It trades in a 52-week range of US$3.945 and US$1.9499.

Emerita Resources Corp.

Emerita Resources Corp. (EMO:TSX.V; EMOTF:OTCMKTS; LLJA:FSE) recently released the results of its drilling on the El Cura deposit located on the company's Iberian Belt West property.

Emerita found high-grade gold and copper, especially in drill hole EC007, which returned 2.9% copper (Cu) and 2.81 grams per tonne gold (g/t Au). Joaquin Merino, the company's president, noted the drill results could be a step forward toward targeting more high-grade deposits in El Cura.

Varun Arora with Clarus Securities reviewed Emerita in June of 2023 and rated the company as a "Speculative Buy" with a target share price of CA$3.75 and a potential return on investment of 349%.

The resource hosted by the Iberian Belt West project and possible gold recovery are major catalysts, according to Arora.

Emerita has been highly rated by Technical Analyst Clive Maund, who said the company was an "Immediate Buy" that could break out if the stock hit CA$0.70 last August. More recently, on January 26, Atrium Research commented that Emerita's Iberian Belt West property was "comparable to some of the largest Zinc mines in the world."

Refinitiv provided a breakdown of the company's ownership and share structure, where management and insiders own approximately 5.61% of the company. According to Refinitiv, Michael Lawrence Guy owns 1.84% of the company with 4.32 million shares, David Patrick Gower owns 1.18% of the company with 2.76 million shares, Joaquin Merino-Marquez owns 0.89% of the company with 2.09 million shares, Catherine Stretch owns 0.68% of the company with 1.60 million shares, Marilia Bento owns 0.43% of the company with 1.00 million shares, Gregory Duras owns 0.28% of the company with 0.65 million shares, Damian J.D. Lopez owns 0.20% of the company with 0.46 million shares, and Ian T. Parkinson owns 0.11% of the company with 0.25 million shares.

Refinitiv reports that institutions own 1.26% of the company, as Merk Investments L.L.C. owns 1.17% of the company with 2.75 million shares, and Palos Management Inc. owns 0.09% of the company with 0.20 million shares.

According to Refinitiv, there are 234.82 million shares outstanding with 221.63 million free float traded shares, while the company has a market cap of CA$122.11 million and trades in a 52-week range of CA$0.255 and CA$1.03.

Sierra Madre Gold and Silver Ltd.

Another company to look at is Sierra Madre Gold and Silver Ltd. (SM:TSX.V; SMDRF:OTCQX) which recently announced an update on the progress of its mine restart at its 100%-owned La Guitarra silver and gold project. 

Located in Estado de Mexico, a mine restart study for La Guitarra should be finished in Q2 of 2024. It will include new estimates of underground mine material on Guitarra, Coloso, and Nazareno mines, and the Los Angeles deposit, and an operating cost estimate. It also will include a capital cost estimate.

Maund reviewed the company in July of 2023, rating it a "Strong Speculative Buy," and saying he believes it to be low risk for a speculative junior stock. Maund was encouraged by the high-quality gold and silver grades found on the La Tigra property.

In August of 2023, Maund released an updated review of the company, where he reiterated his "Buy" rating and stated that the stock had outperformed the sector and looked set to advance. 

Carlisle Kane of Equedia Investment Research reviewed Sierra Madre in November 2023 and seemed encouraged by the interest of First Majestic Silver Corp. (FR:TSX; AG:NYSE; FMV:FSE)), which acquired shares in Sierra Madre in exchange for the La Guitarra project.

On November 9, 2023, Bereket Berhe with Beacon Securities also rated Sierra Madre as a "Speculative Buy" with a share target price of CA$0.75. The report commented on the company's stock,

"The analyst views Sierra Madre as undervalued based on progress advancing La Guitarra towards a near-term restart of production," the analyst wrote. "With exploration upside from Tepic and La Tigra, Beacon Securities sees potential for the stock to re-rate."

Sierra Madre provided a breakdown of the company's ownership and share structure, where management and founders own approximately 21.1% of the company. According to Refinitiv, President and CEO Alexander Langer owns 2.01% of the company with 2.99 million shares, Executive Chairman and COO Gregory K. Liller owns 1.83% of the company with 2.72 million shares, Director Jorge Ramiro Monroy owns 1.36% of the company with 2.02 million shares, Director Alejandro Caraveo owns 1.19% of the company with 1.77 million shares, Director Kerry Melbourne Spong owns 0.44% of the company with 0.66 million shares, and Director Gregory F. Smith owns 0.17% of the company with 0.25 million shares.

Institutional investors own 11.1% of the company. Commodity Capital A.G. owns 4.51%, with 6.72 million shares.

First Majestic Silver Corp., a strategic investor, owns 47.7% of the company with 69.06 million shares.

The rest is with retail and high-net-worth investors.

According to Refinitiv, there are 149.12 million shares outstanding and 69.63 million free float traded shares, while the company has a market cap of CA$41.72 million and trades in a 52-week range of CA$0.27 and CA$0.74.

Important Disclosures:

1. Soma Gold Corp., Dakota Gold Corp. Emerita Resources Corp., and Sierra Madre Gold and Silver Ltd. are billboard sponsors of Streetwise Reports and pay SWR a monthly sponsorship fee between US$4,000 and US$5,000. In addition, Soma Gold Corp. has a consulting relationship with an affiliate of Streetwise Reports, and pays a monthly consulting fee between US$8,000 and US$20,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Soma Gold Corp., Dakota Gold Corp.
3. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
4.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

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