Precious metals mining companies, notably explorers, continue to offer potentially good returns, reckon analysts at Noble Capital Markets Inc.
Noble has reviewed the fourth quarter of 2022, crunched some numbers, and thinks that if gold and silver prices hold their recent gains, investors may begin to invest "more confidently and aggressively".
During 4Q, mining companies, as measured by the XME, appreciated 17.2% compared to a 7.1% gain in the S&P 500 index, the analysts noted.
The VanEck Vectors Gold Miners (GDX) and Junior Gold Miners (GDXJ) exchange traded funds (ETFs) were up 18.8% and 21% respectively, they added.
Meanwhile, gold, silver, copper, and lead futures gained 9.2%, 26.3%, 12.3%, and 6.1% respectively.
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"In our view, interest rates could peak by mid-year with the potential for easing depending on economic conditions. We think precious metals prices around current levels are sufficient for mining companies to be profitable and attract new investment. Our outlook is for range-bound pricing around current levels with a modest upward bias in the first half of 2023," wrote analysts.
Noble is less certain, however, on the near-term for industrial metals, such as copper and zinc, with futures for the latter declining 1.1% in the fourth quarter.
"While the long-term investment case for owning industrial metals mining companies remains favorable, it may be too early to offer a bullish call due to near-term concerns about economic growth in the U.S. and abroad," the analysts noted.
Overall, copper declined 13.2% in 2022 but rebounded in the fourth quarter.
"While the near-term outlook for industrial metals could be negatively impacted by near-term macroeconomic factors, an eventual return to economic growth could result in strong prices due to potential supply and demand imbalances," they added.
Contact the writer at giles@proactiveinvestors.com