From Zacks: After much speculation on “Will it or won’t it?”, the Fed’s decision to leave interest rates unchanged earlier this week sent precious metals on a high, with silver closing 3% higher at $19.80 per ounce.
Fed Stays Put on Rate Hike
Per the statement, factors have improved since its July meeting with solid job gains and increased household spending. However, business-fixed investment remains soft and inflation is trending below the committee’s 2% longer-run objective, partially exhibiting earlier declines in energy prices and prices of non-energy imports.
The Fed, chaired by Janet Yellen, stated that though that the case for a rate hike has strengthened, the committee has decided to wait for the time being, to wait for further evidence of continued progress toward its objectives. The Federal Reserve is thus maintaining the current target rate for the federal funds rate at 0.25% to 0.5%.
The Fed anticipates economic activity to expand at a moderate pace and improved labor market with gradual adjustments in the stance of monetary policy. Though inflation will remain low in the near term, it will eventually rise to 2% over the medium term as the transitory effects of past declines in energy and import prices wane and the labor market strengthens further.
Impact on Markets and Metals
The markets cheered the Fed’s dovish stance. As of Wednesday close, the Nasdaq hit a record high, adding 53.83 points to 5,295.18 while the Dow Jones Industrial Average gained 163.74 points to close at 18,293.70 and the S&P 500 shot up 23.36 points to 2,163.12. Precious metals gained on the back of the dovish stance and a weaker dollar. It’s a known fact that a delay in raising interest rates works in favor of precious metals like gold and silver which produces no income but rather relies on price appreciation to attract investors.
Silver Will Continue to Shine
We believe silver will continue to outperform gold in the coming months riding on the uncertainty of rate hikes in the future as the Fed has kept the possibilities open for a rise this year. Further, Silver has varied industrial applications which drive its demand significantly.
On the other hand, global mine supply production is projected to fall 5% in 2016 – the first drop in global silver mine production since 2002. Thus, a potential silver deficit provides a solid ground for silver price gains this year. Price appreciation will also be supported by a flight to safety amid volatile equity markets.
Which Silver Stocks to Invest in?
We believe it would be a prudent to buy silver stocks that have surged on the Fed statement and have positive momentum going forward. As per our style score system, the Zacks Momentum Style Score indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success.
Back-tested results show that stocks with Style Scores of ‘A’ or ‘B,’ when combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) handily outperform other stocks. A top Momentum Style Score knocks out a lot of the screening process as it takes into account several factors including volume change and performance relative to its peers.
6 Silver Stocks on a Rally and Gaining Momentum
Flaunting a Zacks Rank #1 or #2 and a Momentum Style Score of ‘A’ or ‘B’ the following stocks are marching ahead, and still appear to have plenty of upside potential left. Further, these companies have been seeing positive interest from analysts of late.
Based in Vancouver, Canada, Silver Standard Resources engages in the acquisition, exploration, development, and operation of precious metal resource properties in the Americas. The company primarily explores for gold, silver, zinc, and lead deposits.
SILVER STD RES Price
The stock sports a Zacks Rank #1 with a Momentum Score of B soared 7.46% yesterday to close at $13.39. The Zacks Consensus Estimate for 2016 is at 82 cents, a radical improvement from the loss of 10 cents per share in the prior year. The estimate has moved up over the past 60 days.
Pan American Silver, along with its subsidiaries, engages in silver mining and related activities. Pan American Silver sports a Zacks Rank #1 and a Momentum Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.
PAN AMER SILVER Price
The stock was up 6.64% yesterday to close at $18.46. The Zacks Consensus Estimate for 2016 is at 30 cents, an improvement from the loss of 38 cents per share in the prior year. The estimate has moved up over the past 60 days.
Vancouver, Canada-based Endeavour is a mid-tier precious metals mining company with three high-grade, underground, silver-gold mines in Mexico. The stock carries a Zacks Rank #2 and a Momentum Score of A.
ENDEAVOUR SILVR Price
The stock surged 10.69% to close at $5.59 yesterday. Moreover, for 2016, the Zacks Consensus Estimate is 4 cents, an improvement from the loss of 11 cents per share in the prior year. Estimates have moved north over the past 30 days.
Vancouver, Canada-based First Majestic Silver engages in the acquisition, exploration, development, and production of mineral properties with a focus on silver projects in Mexico.
FIRST MAJESTIC Price
First Majestic holds a Zacks Rank #2 and a Momentum Score of A. The stock gained 9.33% to close at $12.66 yesterday. The earnings estimate for the current year has moved north over the past 60 days to 20 cents, an improvement from the loss of 11 cents per share in the prior year.
Headquartered in Reno, Nevada, Tahoe Resources explores, develops, and operates mines in the Americas and primarily produces copper, gold, silver, lead/zinc, as well as natural gas and petroleum. The stock holds a Zacks Rank #2 and a Momentum Score of A.
TAHOE RESOURCES Price
The stock has increased 5.26% yesterday to close at $14.20. The Zacks Consensus Estimate for 2016 is at 72 cents, exhibiting a 50.89% year over year climb. The estimate has moved up over the past 60 days.
Headquartered in Lima, Peru, Fortuna Silver Mines Inc. engages in the exploration, extraction, and processing of mineral properties in Latin America.
FORTUNA SILVER Price
This Zacks Rank #2 stock has a Momentum Score of A. It rose 5.97% yesterday to close at $7.99. For 2016, the Zacks Consensus Estimate has been revised upward over the past 60 days to 21 cents, almost fourfold the earnings of 5 cents per share in the prior year.
A strong price increase implies robust demand for the stock, which is often triggered by either a good earnings performance or some positive news, which may further boost the stock price. Strong upward estimate revision may carry the momentum forward a little longer, making it the ideal time for investors to get on board. A combination of these two factors makes the above stocks a must-add to your portfolio at the moment.
Editor’s note: Investors looking for silver miner exposure without the risks of owning single stocks should consider the Global X Silver Miners ETF (NYSE:SIL). SIL currently boasts over $460 million in assets, and has surged 155% since the start of 2016.
This article is brought to you courtesy of Zacks Research.