Junior Market Can't Shake Investor Apathy: Haywood Securities
The TSX Venture Composite remains in a fragile state of recovery following a tumultuous 2018, said Haywood Securities in its second quarter junior exploration report released today.
Haywood notes that precious metal has been a headwind and there is "...continued apathy towards the junior exploration sector in Canada as the TSX Venture Composite remains in a fragile state of recovery."
Gold had a strong start in 2019 but fizzled.
"[Gold formed] a head and shoulders top pattern that failed to breakdown and now remains rangebound between ~US$1,280 and ~US$1,300," Haywood wrote in its Q2 report.
Base metals are not doing well. Haywood writes that the S&P/TSX Global Base Metals Index had a ~14% drawdown from its April peak, following a ~28% upswing from December 2018. Precious metal companies have been sinking, too. Haywood notes that the VanEck Vectors Junior Gold Miners ETF (GDXJ) has had a ~20% drawdown from its February peak.
While the U.S. dollar is strong, which has been a headwind for commodities, China-America trade tensions could help gold.
"We are looking for a potential reversal in the U.S. dollar and continued relative strength in the gold price as catalysts for a rebound in the junior exploration sector," the report said.
Base metals, however, may not fare as well.
"A spike in equity and fixed-income volatility, along with widening credit spreads, are catalysts that would likely drive a safe-haven bid in precious metals but could also be bearish for base and industrial metals," according to the report.