SSR Mining (NASDAQ: SSRM ) The stock fell 3.4% as of 12:45 a.m. Wednesday after gold prices fell another leg on inflation fears. 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 continue for some time. Investors look to precious metals such as gold and silver as safe havens in times of war, and the SSR mines both (along with lead, zinc and copper). Silver rose 2.5% after the attacks in Iran, and gold rose 2.6%.
War can also be inflationary, though, especially when it restricts oil supplies and raises oil prices. So while the CPI held steady in February (still 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 precious metals (which do not pay interest) and buy bonds instead (which do pay interest, and pay off. others interest as inflation rises). The concern today sent gold down 1.1% ($5,183 an ounce), and silver down 5.3% to $84.85.
Of all the world’s gold reserves, however, SSR mining may be one of the safer options.
why? Recall that a week ago, SSR agreed to sell its stake in a Turkish gold mine for $1.5 billion. This limits the stock’s exposure to falling gold prices (if they fall) — while guaranteeing a $1.5 billion windfall today.
When you consider that SSR costs less than 17x trailing earnings and 8x forward earnings, SSR looks to me like a good, cheap way to invest in gold in uncertain times.
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