The Silver Lake Resources Limited. (ASX: SLR) share price is gaining ground this afternoon and now trades 5% higher on the day at $1.65.
That caps off an impressive week for the gold-copper miner, having climbed a further 10% into the green this past week, ahead of the S&P/ASX 200 index (ASX: XJO)’s return of 1.89% in the same time.
What’s pushing Silver Lake shares higher today?
Whilst there’s been no market-sensitive information for the company today, Silver Lake shares have been on the move since late September, coming off a low of $1.28 near month’s end.
This uptrend has continued until today. Consequently, the company now trades back at its June-July 2021 price levels.
In the absence of any price-sensitive news, we have to look to the underlying commodity markets the company has exposure to in order to understand what might be fuelling this momentum.
Silver Lake’s main revenue stream is the sale of gold and gold-copper concentrate in Australia – the latter of which is used to derive both gold and the base metal copper.
As such, it is considered a price taker that must accept the going rates of the markets it sells into.
In the world of the commodity markets, this is often determined by the unseen forces of supply and demand, plus some fundamental factors – not too dissimilar from the financial markets.
However, specific to gold, this also has to do with the yellow metal’s status as a safe-haven asset in times of economic uncertainty.
Traditionally, in times of market turbulence, downturn, and so on, investors flock to open positions in the precious golden metal– either buying the bullion itself, futures contracts, or equities in gold mining companies – in a part of what is known as a “flight to quality”.
We’ve seen the culmination of these forces begin to take effect over the last month or so, particularly with the tapering of the US Federal Reserve bond purchase program; inflationary pressures induced from the pandemic; and the energy crisis that has begun to plague the UK and Europe.
As such, the price of gold has crept up from a previous low of US$1,726/t.oz on 29 September to now trade at US$1,789/t.oz at last check.
This upward move in gold pricing appears to have inflected positively on the broader ASX gold sector, with the S&P/ASX All Ordinaries Gold Index (XGD) also climbing 3.5% and 8.5% today and in the past week respectively.
That’s well ahead of the benchmark index’s paltry 1.8% return in this time.
In light of these relationships, and strengths in the broad ASX gold sector, the picture starts to form as to what is driving the Silver Lake share price today.
As the price of gold continues to gain strength in the near term, it appears investors who are bullish on gold are concurrently bidding up the gold miner’s share price.
Silver Lake share price snapshot
Despite rallying 20% in the last month and its past week’s gain, the Silver Lake share price has had a difficult year to date.
It has posted a loss of 8% since January 1, extending its bloodbath over the past 12 months to a loss of 31.5%.
These results are well behind the broad index’s return of around 19% in that time.
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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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