Why Coeur Stock Dropped Again Today
Key Points
The U.S. Bureau of Labor Statistics reported 2.4% CPI growth in February, stoking inflation fears.
Inflation can be bad for gold prices -- and for Coeur stock.
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Coeur Mining (NYSE: CDE) stock declined 6.3% through 12:12 p.m. ET Wednesday after gold prices took another turn for the worse. This morning, the U.S. Bureau of Labor Statistics reported the Consumer Price Index (CPI) rose 2.4% for a second straight month in February.
These two things are connected.
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Gold and silver and inflation
There's war raging in the Mideast, and it may not end soon. Investors often view gold as a safe haven in times of conflict, sending gold prices higher. Indeed, gold prices soared 2.6% in the immediate aftermath of the attacks on Iran.
War can also be inflationary, though, especially when it strangles global oil supplies and drives up fuel prices. So while CPI held steady in February (albeit still above the Fed's 2% inflation target), the worry is that the March data will show a sharp rise in inflation.
If this happens, investors may sell gold (which doesn't pay interest) and buy bonds instead (which do pay interest, and increasingly more interest as inflation rises). In a nutshell, this is why gold prices are down 1.3% to $5,174 per ounce today -- and why silver prices are down 5.3% to $84.85 an ounce.
Is Coeur Mining stock a sell?
Coeur, of course, mines both gold and silver. When the company's two main products fall in price, it makes sense Coeur's stock price would also fall short term.
Making matters worse, Coeur is one of the pricier gold stocks on the market, costing 24.6 times trailing earnings. Granted, the stock looks cheaper based on forward earnings -- 15.4x. But that just highlights the risk that if inflation surges and gold prices falter, Coeur stock might not get much cheaper.
With plenty of cheaper gold stocks to bet on, Coeur stock's a sell for me.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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