Rising inflation and labor costs in the U.S. are expected to be exacerbated by additional fiscal stimulus actions as the Fed’s monetary policies remain dovish. This, coupled with rising volatility in the stock markets, has been heightening investors’ attraction to gold as an investment safe haven. And because analysts expect the demand for gold and its prices to continue rising in the near term, we think small-cap names Torex Gold Resources (OTC:TORXF) and Argonaut Gold (OTC:ARNGF) should deliver substantial returns. Read on for some details.Gold prices have been recovering over the past couple of weeks, driven primarily by increasing demand for it as a safe-haven investment. Increasing inflation in the United States, coupled with rising labor costs, has motivated many investors to hedge a proportion of their portfolios by investing in precious metals. Also, because analysts expect real interest rates to remain in historically low territory due to the Fed’s ultra-loose monetary policy, gold should continue benefiting.
The Fed’s continued dovish stance and proposed fiscal stimulus packages are also putting pressure on the Greenback, and investors have been rotating to gold to hedge their portfolios against market volatility. This is evidenced by SPDR Gold Minishares Trust’s (GLDM) 3.2% gains over the past month, compared to S&P 500 index’s marginal decline.
Given this backdrop, we think small-cap gold mining stocks Torex Gold Resources Inc. (TORXF) and Argonaut Gold Inc. (ARNGF) could deliver solid returns in the coming months.