Fool's Gold Report: Miners Plunge, but Bullion Holds Gains

Gold mining stocks gave up a big portion of their recent gains, but metals prices generally climbed somewhat. Find out the reason for the disparity here.

Feb 12, 2014 at 7:04PM

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.

Ordinarily, you can expect the price of bullion to move in the same direction as the miners of that bullion, albeit not necessarily by the same amounts. Yet today, mining stocks and metals prices moved in opposite directions, with April gold futures rising more than $4 per ounce to $1,294 and March silver gaining almost $0.17 per ounce to $20.32. That was also enough to send SPDR Gold Shares (NYSEMKT:GLD) up 0.1%, even though the iShares Silver Trust (NYSEMKT:SLV) fell by the same margin. But the big move of the day was in the MarketVectors Gold Miners ETF (NYSEMKT:GDX), whose shares gave back almost 3.5% today.

Metal

Today's Spot Price and Change From Yesterday

Gold

$1,292, up $1

Silver

$20.24, unchanged

Platinum

$1,399, up $14

Palladium

$724, up $7

Source: Kitco. As of 5:30 p.m. EST.

What's up with gold and down with miners?
For bullion, many investors pointed to positive news from China that suggested that economic activity was on the upswing. A more than 10% jump in export activity in January from the previous year's levels suggested a stronger economy than many thought, and with gold's big plunge in 2013 coinciding with concerned about signs of sluggishness in China's economy, today's news was welcome. Indeed, the fact that platinum and palladium outperformed gold and silver points to the industrial-focused nature of the positive sentiment today.

Gold And Silver

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

Yet rather than contradicting that thesis, the drop in miners today just represents a check on what has been an extremely strong rally for hard-hit gold mining companies during 2014. To put the loss in perspective, the Market Vectors ETF entered the day up 21% on the year, even though bullion prices had risen only about 8%. Some degree of leverage is appropriate given the economics of gold mining, but unsustainable gains tend to reverse themselves after a while.

Moreover, some astute traders might be hoping to rebuy shares of gold miners at lower prices following earnings announcements in the coming days and weeks. For many miners, results will look particularly ugly, as they won't reflect the 2014 rebound in bullion prices. With many companies having taken steps to shore up their balance sheets and reduce costs, any improvement in the metals themselves could produce real gains.

Investors must prepare themselves for big adjustments downward in reserves, given the drop in bullion prices in 2013. If gold prices recover, though, those reserves will come back and add to profits later. That could help set the stage for an even larger recovery down the road.

Be smarter about your money
Warren Buffett isn't the biggest fan of gold, but he has made billions through his investing and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers