Fool's Gold Report: Gold, Silver Plunge As Fed Taper Fears Grow; Fortuna Silver Soars

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.

Against the backdrop of last week's bullishness, today's $14-per-ounce drop in spot gold prices was incredibly disappointing. The decline came as many gold investors worried about a Wall Street Journal report suggesting that the Federal Reserve would likely continue the downward path of its bond purchases, announcing a further reduction to $65 billion per month at its monetary-policy meeting next week. Combined with rising stock markets and generally favorable economic forecasts, SPDR Gold Shares (NYSEMKT: GLD  ) ended the day down 1%. Silver fell a more dramatic $0.45 per ounce to $19.87, sending iShares Silver (NYSEMKT: SLV  ) to a 1.7% decline after the long holiday weekend. Platinum joined the downward momentum, falling $16 per ounce to $1,447, but palladium once again bucked the trend and rose $1 per ounce to $747.

Image sources: Wikimedia Commons; Creative Commons/Armin Kubelbeck.

Forecasts for 2014 precious-metals levels continue to come in, and on the whole they're not terribly bullish. The London Bullion Market Association's annual survey included average projections of $1,219 per ounce for gold this year, with silver weighing in at $19.95 per ounce. Most investors expect relatively tight ranges on metals-price movements, with gold expected to move between $1,067 and $1,379 on average. More favorable estimates of $1,490 for platinum and $775 for palladium still leave some upside from current levels, but it's important to note that the LBMA's 2013 projections completely failed to anticipate the plunge in gold and silver last year.

Mining stocks, though, once again entirely bucked the trend, with Market Vectors Gold Miners ETF (NYSEMKT: GDX  ) rising 1.6%. Goldcorp (NYSE: GG  ) gained almost 2% after takeover target Osisko chose to reject the larger company's buyout bid, arguing that the timing of the bid fails to give full value to the potential from its Canadian Malartic mine. The rejection makes it clear that at least for Osisko, falling gold prices haven't led to desperation to accept any reasonable deal that comes around.

Fortuna Silver Mines (NYSE: FSM  ) soared 11% after releasing favorable results from its Trinidad North mine in Mexico. The company said that eight drill holes produced some impressive finds, including one result showing more than 3.5 kilograms of silver and 15 grams of gold per ton of ore over a 3.7-meter width. Even with bullion prices remaining weak, Fortuna's jump shows that investors continue to reward companies that prove their full potential.

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  • Report this Comment On January 22, 2014, at 3:15 PM, OKwarrior wrote:

    The gold and silver miners are the best value play out there at this point. Just look at the HUI ETF relative to the price of the metal. Right now, even after a 15% bump from the first of the year, I still think they are a better buy than the rest of the stock market.

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