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.
Gold and other precious metals plunged today as investors gained confidence in the stock market and the U.S. dollar. Spot gold closed down almost $25 per ounce to just above $1,243, sending the SPDR Gold Shares (NYSEMKT: GLD ) down 2.2% on the day. Silver followed suit with a steeper drop of $0.57 per ounce, to $19.14, and the silver-tracking iShares Silver Trust (NYSEMKT: SLV ) declined 2.8%. Neither platinum nor palladium escaped the carnage, as platinum plunged $30 per ounce, to $1,379, while palladium fell $8 per ounce, to $705.
Amid a currency crisis in some minor emerging-market currencies, the U.S. dollar established itself as the go-to safe-haven currency, rising against just about every foreign currency in the Asia-Pacific region, and holding its own against the euro and the British pound. As long as investors remain confident in the value of the dollar, hard assets like gold have a difficult time gaining traction, and today's trading action clearly demonstrates that common phenomenon.
Mining stocks fared no better, as the Market Vectors Gold Miners Index (NYSEMKT: GDX ) dropped 2.2%, and gave up most of its gains from yesterday. Newmont Mining (NYSE: NEM ) fell even more sharply, losing 3%. After the market closed, the mining giant gave its preliminary figures for 2013 production, which included full-year gold production of 5.1 million ounces, and copper volumes of 144 million pounds, both near the high end of expected ranges. Yet, its 2014 outlook showed only minimal potential gold production gains, with a range of 5 million to 5.3 million ounces expected. Moreover, with all-in sustaining costs at $1,075 to $1,175 per ounce for gold, and $2.75 to $2.95 per pound of copper, Newmont doesn't have much margin for profit at current price levels, especially in gold.
Goldcorp (NYSE: GG ) fell 2.2% as it continues its hostile pursuit of Osisko Mining, with the parties going to court amid allegations about the confidential information that Goldcorp received about Osisko prior to the hostile offer. With the low costs at Osisko's flagship Canadian Malartic mine, the asset makes a great acquisition candidate for Goldcorp. The question is whether Goldcorp will raise its offer to make Osisko happy, or try to court shareholders who might be more willing to take the money and run.
Today's plunge in gold is bad news for long-term bulls, especially given the size of the decline compared to the smaller advance in gold prices yesterday. Even though gold will likely finish up for the month of January, the minimal strength of its upward movement so far in 2014 doesn't guarantee continued success for gold investors throughout the year.
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