Fool's Gold Report: Spot Gold Jumps Another $15; Miners Fall

Gold jumped for the second day in a row, but mining stocks didn't follow suit. Does that spell trouble for the 2014 rally?

Jan 3, 2014 at 7:35PM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

On Friday, gold managed to post solid gains for the second day in a row, with spot prices climbing $15 per ounce to reach $1,238. Experts pointed to coming events like the Chinese New Year later this month as a potential source of demand for the physical gold market, but concerns about the stock market's poor start to 2014 also likely played a role in pushing the yellow metal's prices higher. SPDR Gold Shares (NYSEMKT:GLD) gained 1.1% in fulfilling its function of tracking bullion prices.

But of some concern was the fact that other metals underperformed gold. In contrast to recent days, silver didn't do as well as its more expensive sibling, as the iShares Silver Trust (NYSEMKT:SLV) gained about 1%, and spot prices rose $0.15 to $20.15 per ounce. Platinum-group metals were mixed, with platinum seeing modest gains of $7 to $1,405 per ounce, while palladium gave up ground, falling $2, to $726 per ounce. Relative weakness in platinum and palladium might have followed the unexpected decline in December auto sales, with automakers representing a huge source of industrial demand for platinum-group metals.

Even more troublesome, mining stocks failed to follow spot gold prices higher. The Market Vectors Gold Miners Index (NYSEMKT:GDX) fell almost 1%, with weakness among individual gold and silver miners across the industry. The conundrum that many mining companies face is whether they should hedge at current weak prices in order to rid themselves of the risk of still lower prices down the road. Given bullion prices that don't give them nearly as much profit potential compared to their costs of production, the temptation to lock in some profit is definitely there. But doing so would cap, or even eliminate, the benefit of rising gold prices for mining-company shareholders.

Looking forward, it will be important to see how producers react to a continued rise in gold and other precious metals prices. At some point, you might see mining companies restarting hedging programs, and if that happens, it could quickly take the wind out of the sails of even this modest gold rally.

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Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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