SSR Mining (NASDAQ: SSRM) stock declined 3.4% through 12:45 p.m. ET Wednesday after gold prices took another leg lower on inflation fears. This morning, the U.S. Bureau of Labor Statistics reported the Consumer Price Index (CPI) rose 2.4% for a second straight month in February.
These two things are connected.
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There’s a war in the Mideast, and it may last a while. Investors view precious metals like gold and silver as safe havens in times of conflict, and SSR mines both (along with lead, zinc, and copper). Silver prices soared 2.5% in the aftermath of the attacks on Iran, and gold prices leapt 2.6%.
War can also be inflationary, though, especially when it restricts oil supplies and drives up fuel prices. So while CPI held steady in February (still above the Fed’s 2% inflation target), the worry is that the March data will show a sharp rise in inflation.
If this happens, investors may sell precious metals (which don’t pay interest) and buy bonds instead (which do pay interest, and pay more interest as inflation rises). This worry has gold sinking 1.1% (to $5,183 an ounce) today, and silver down 5.3% at $84.85.
Out of all the world’s gold stocks, though, SSR Mining may be one of the safer choices.
Why? Recall that one week ago, SSR agreed to cash out its stake in its Turkish gold mine for $1.5 billion. This limits the stock’s exposure to falling gold prices (if they do fall) — while guaranteeing a $1.5 billion windfall today.
When you consider that SSR costs less than 17x trailing earnings and barely 8x forward earnings, SSR looks to me like a good, cheap way to invest in gold in uncertain times.
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