Since Russia invaded Ukraine, many investors have focused on soaring oil prices. However, as crude oil hits decade highs, another commodity is also seeing its prices rise significantly. The metals gained rapidly, with gold and silver hitting above $2,056 and $26 per ounce, respectively, at the time of this writing. These trends are predictable. When anxiety is high on Wall Street, investors focus on gold as a safe investment in turbulent times. As such, metals stocks could experience the same kind of growth we saw for oil stocks last week.
Today is a great start for metal stocks which were already up. The current mining boom could be what pushes several companies out of the penny stock category. For example, Northern Dynasty Minerals (NYSEAMERICAN:NAK) jumped all morning. As of this writing, it is up over 13% for the day. Also, Aquatic metals (NASDAQ:SGQA) is up 18%. Meanwhile, Polymet leads (NYSEAMERICAN:PLM) is up more than 40%.
That’s not all. TMC The metal company (NASDAQ:TMC), a name known for its legal controversy, has also increased. It is up more than 42% on the day. Ultimately, Hydroft Mining (NASDAQ:HYMC) made an impressive jump of 160% and more.
What’s going on with metal stocks?
At present, these five names continue to rise steadily and show no signs of slowing down. The question remains, however: for how long? These price spikes are not driven by the supply and demand for organic products; they are driven by fear. The price of nickel more than doubled today, hitting $100,000 per metric ton. This was quickly followed by a report that the London Metals Exchange (LME) would suspend trade in nickel, of which Russia is the world’s third largest producer.
According to analyst Carsten Menke of Julius Baer, further disputes should continue to push prices higher. He also noted that palladium would “likely have a more lasting impact, as it could push the global economy into a stagflation scenario.” Analysts would consider such a result very bullish for gold prices. Additionally, this type of action would be excellent for all metals stocks as it would continue to generate positive market momentum.
Of course, small cap companies in this space can be difficult to value. Widespread market momentum can send names in a sector skyrocketing. But this raises some questions about the sustainability of their growth. As noted, names like TMC also have a checkered past, marked by environmental concerns and legal battles.
That said, InvestorPlace Contributor Josh Enomoto also noted that Aqua Metals has “outstanding implications for a possible green future” with its battery recycling technology. It should be noted that nickel is also a key component of electric vehicle (EV) batteries. To this end, Polymet has mining operations in the same state as Metal heel (OTCMKTS:TLOFF). Talon is a nickel miner who signed a deal with You’re here (NASDAQ:TSLA) earlier this year.
What this means
In the recent evaluation of Hycroft Mining, InvestorPlace Contributor Joel Baglole noted that “over the long term, the stock price should normalize as prices decline and stabilize again.”
If this is true, we will see all stocks of metals that have hit highs so far decline, as smaller metals tend to follow gold. As such, a key element for investors to profit from the current metals boom will be choosing the most valuable metals stocks in normal times, when the forces of supply and demand drive the markets.
On Penny Stocks and Low-Volume Stocks: With rare exceptions, InvestorPlace does not publish reviews of companies with a market capitalization of less than $100 million or trading fewer than 100,000 shares per day. This is because these “penny stocks” are often the playground of scammers and market manipulators. If we ever post comments on a low-volume title that may be affected by our comments, we require thatInvestorPlace.comThe authors of disclose this fact and warn readers of the risks.
Read more: Penny Stocks – How To Profit Without Getting Scammed
At the date of publication, Samuel O’Brient held (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.