Bad news for Gold stocks,

    Posted by victorh on 21st of Feb 2020 at 09:45 pm

    Bad news for Gold stocks, these companies like many others rely to varying degrees on parts and machinery from China. Miners in particular use all sorts of heavy machinery,  structural steel and all sorts of replacement parts mostly coming from China.  If the virus gets widespread I would  expect at least delays, possibly cancellations of projects. If the virus really takes off no one will be concerned about mining as personal survival will be the most important thing. Barring the virus becoming widespread I would expect miners to continue to operate but with the supply chains from China shut down most companies would have a drop in output, the exact amount depending on each company. 

    Look at what happened to AEM this week, their forward guidance said to expect 1.8 million ounces mined this year versus expected 1.9 million and the stock got trashed down 15% for such a small reduction in forward guidance.  I can only imagine what would happen in the future to the stock price of miners if they start reducing their gold output. Under that scenario I could easily see the physical price of gold continue to advance while the stock price of many miners would decline. Also if we get a really bad stock market decline it could drag down prices of gold miners as in the 2008-2009 decline.  So considering everything it might be prudent to keep these points in the back of your mind. Hopefully the virus won't spread much here and in Canada, but even so China manufacturing is pretty much completely shut down now and for the foreseeable future so there are going to be all sorts of delays in shipments from China for all sorts of things.

    Another factor to consider is that many miners have operations in third world countries such as Africa, South America, Indonesia, etc and many of these countries have poor health care systems and would be ill equipped to handle and contain the virus. If the virus became widespread in those areas many workers just wouldn't show up or be able to which would be another factor reducing output.  

    The following article lists all the many personal and industrial products we rely on that come from China. 

    Wouldn't the story be the

    Posted by RichieD on 23rd of Feb 2020 at 07:05 pm

    Wouldn't the story be the same for nearly all industries in the US (aerospace, automobile, chemical, consumer electronics, non-durable and durable manufacturing, computers, housing construction, pharmaceuticals, etc.)??  Apple and Coca Cola have already put forth that message.  Only service related businesses and software would escape.  No?

    Yes that would be true

    Posted by victorh on 23rd of Feb 2020 at 07:25 pm

    Yes that would be true for most companies depending how much they rely on China for supplies which means the value of many companies will decline like we are seeing now. My point is the gold stocks would be particularity vulnerable as look what happened to AEM on just a tiny forward guidance decrease in production.   


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