Economic indicators across the board in the US continue to show the economy likely peaked last year and momentum has been slowly waning thanks to the Federal Reserve’s actions. Moreover, other global economies could be catching up to the US, particularly emerging markets that keep rising with strength. This is bullish for gold and mining stocks like Agnico Eagle Mines (AEM), explains Omar Ayales, editor of Gold Charts R Us.
INDY, an ETF that tracks 50 of the strongest companies in India, is breaking out from a bullish H&S bottom, showing more upside for longer is now likely; its rise is just starting. The same can be seen in many other emerging markets like in Mexico, Indonesia, Argentina, and China among many others.
Global strength means stronger demand for resources, energy, and commodities overall. It means stronger inflation for longer, and not driven exclusively by the US or any other country in particular, but by a variety of global factors.
It could also put downside pressure on the dollar as investors continue to look for investment in other cheaper jurisdictions with higher upside potential. The dollar could break intermediate support at the 98-101 level. If it does, the decline to its next key support at 90 would be likely and a very bullish catalyst for emerging markets, global currencies and commodities broadly speaking, especially gold.
AEM is one beneficiary that is holding strong, above the March uptrend and ST support near $56. Further, it has intermediate support above the Sept uptrend near $48. Overall, it's very strong.
Moreover, AEM just posted strong operating results, giving it an even-stronger backing to its current valuation. The President and CEO Ammar Al-Joundi started off the quarterly review by saying: “The year is off to a good start with strong operational results and the best quarterly safety performance in the company's over 65-year history, which positions us well to meet our full year guidance projections. Costs were better than expected, primarily due to the strong operating results, favorable currency movements and a slight easing of inflationary pressures.”
He added that with the completion of the acquisition of Yamana’s Canadian assets on March 31, AEM will continue to optimize its strategic positions in the Abitibi gold belt, looking to increase annual production from this region and lower operating costs.
Recommended Action: Buy AEM.