Coeur Mining (NYSE: CDE ) The stock fell 6.3% as of 12:12 a.m. Wednesday after gold prices took another turn for the worse. This morning, the US Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 2.4% in February for the second straight month.
These two things are connected.
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There is a war going on in the Middle East, and it may not end soon. Investors often look to gold as a safe haven during times of war, which drives up gold prices. In fact, the price of gold rose 2.6% immediately after the attacks on Iran.
War can also be inflationary, though, especially when it cuts off world oil supplies and raises oil prices. So while the CPI remained steady in February (albeit above the Fed’s 2% inflation target), the concern is that March data will show a sharp rise in inflation.
If this happens, investors may sell gold (which pays no interest) and buy bonds instead (which pay interest, and increasingly. others interest as inflation rises). In short, that’s why gold is down 1.3% to $5,174 an ounce today — and why silver is down 5.3% to $84.85 an ounce.
Coeur, of course, mines both gold and silver. When the company’s two main products fall in price, it makes sense that Coeur’s stock price will fall in the short term.
To make matters worse, Coeur is one of the most expensive gold stocks on the market, with a trailing expense ratio of 24.6. Granted, the stock looks cheap on that basis next to Earnings — 15.4x. But that only underscores the risk that if inflation rises and the price of gold falls, Coeur stock may not get much cheaper.
With so many cheap gold stocks to bet on, Coeur stock is a sell for me.
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