Globe editors have posted this research report with permission of Dundee Capital Markets. This should not be construed as an endorsement of the report's recommendations. For more on The Globe's disclaimers please read here. The following is excerpted from the report:
For some funds and all retail investors, December 31 represents the end of the taxation year. Leading up to this is the season for tax-loss selling and with gold, silver and the XAU index declining 3 per cent, 17 per cent and 21 per cent, respectively, on a YTD basis, we believe precious metal equities will be obvious targets for disposition as we head into the year-end. Admittedly, the recent sell off in the precious metals space suggests that some may have already started selling their underperformers. Our view, however, is that more selling is likely as investors rebalance heading into the year-end. With broader indices such as the S&P/TSX composite index, the S&P 500 and the Russell 3000 all up 7 per cent, 9 per cent and 8 per cent YTD, respectively, we expect that diversified funds & investors will have some gains to offset against losses derived from precious metal equities.
To help identify stocks which we consider to be targets for tax loss selling, we've highlighted stocks with negative YTD returns and stocks which have declined significantly from their 52-week highs.
Given the seasonal nature of tax-loss selling and decreased liquidity heading into the holidays, we think it makes sense for investors to consider trimming underperformers today before the rest of the market begins selling during the more typical tax-loss selling period (i.e. December). In doing so, we believe investors may be able to obtain better prices on disposition. As the broader market commences tax loss selling in late-Nov. & Dec., we believe the broader selling pressure and reduced liquidity could create an opportunity for investors to deploy capital back into gold & silver equities at attractive valuations.
Read the full report here.
Read other research reports here.