While penny stocks — particularly the literal variety — carry extreme risk, not all speculative ventures are built the same. For junior precious metals mining enterprise Golden Minerals (US:AUMN), the immediate reaction may be of consternation, especially considering its 22-cent per share price tag. 

However, AUMN stock benefits from a potentially favorable backdrop as gold and silver prices remain elevated compared to their respective price points at the start of this year.

Based in Golden, Colorado, Golden Minerals primarily focuses on advancing its Rodeo and Velardeña properties in Mexico. Also, through partner-funded exploration agreements, the company is developing its El Quevar silver property in Argentina.

No Correlation

While intriguing on paper, what makes AUMN stock particularly risky is its apparent lack of correlation with gold so far this year. Since the January opener, AUMN lost about 24% of equity value. On the other hand, gold futures listed at The Commodity Exchange Inc. (COMEX) gained more than 8% during the same period.

Another concern centers on gold’s historical inverse relationship with interest rates. As Fintel contributor Cristian Bustos mentioned, “[t]he correlation between gold and interest rates has been well-documented. In almost all situations, whenever interest rates go up, the price of gold goes down. Alternatively, whenever interest rates drop, the price of gold increases exponentially.”

Of course, throughout 2022 and into 2023, the Federal Reserve consistently raised the benchmark interest rate. By logical deduction, then, gold should represent one of the worst-performing assets. However, with fears of recession rising, many investors have sought to protect their wealth.

Unusual Options

Due to gold’s long history as a store of value, the precious metal offers an attractive alternative to contemporary financial vehicles.

Unfortunately for speculators in AUMN stock, thus far, gold’s bullish narrative as a play on the aforementioned fear trade has not benefited the junior miner. However, following the close of the April 25 session, AUMN represented one of the highlights for Fintel’s screener for unusual stock options volume.

Specifically, call volume hit 200 contracts against an open interest reading of 102. On average, call volume reaches 1 contract. In contrast, put volume and open interest both printed zero. Also, the average put volume is zero.

Despite the positive implications for AUMN stock, prospective investors must exercise caution. Notably, while long-term revenue growth is strong  — with Golden posting sales of $23.285 million in 2022 versus $7.73 million in 2019  — the company consistently posts net losses. Last year, Golden suffered a net loss of $9.91 million.