Fool's Gold Report: Gold Plunges, but Palladium Holds Strong

On Monday, gold investors once again saw just how violent pullbacks can be in the precious-metals markets, as continued negative sentiment following last week's decline in gold prices led to an even sharper drop in prices. April gold futures fell $25 per ounce to $1,311, while May silver was down $0.24 to $20.07 per ounce even as spot prices dropped below the $20 mark. SPDR Gold Shares (GLD 0.34%) and iShares Silver (SLV 0.04%) both fell between 1.5% and 2%, but the real damage was in the mining sector, with Market Vectors Gold Miners ETF (GDX 0.60%) plunging almost 5%.

Source: Kitco. As of market close.

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

What's moving the markets Monday?
Having started off 2014 so strongly, gold was overdue for a correction in many traders' minds, and last week's relative geopolitical stability failed to give investors the positive push they wanted in order to justify further gains in the gold market. As long as the Western response to Russia's annexation of Crimea is restricted to political rhetoric and toothless economic sanctions, gold prices aren't likely to get much support from the situation unless further military conflict ensues.

Meanwhile, from an economic viewpoint, China continues to keep gold investors nervous. Interestingly, when weak economic data come out in the U.S., gold investors tend to cheer the news, arguing that further stimulus measures will make gold a more attractive investment. Yet in China, demand for commodities generally outweighs any positive impact of government moves to encourage greater economic activity. That sentiment was clear from base-metals prices Monday, as copper fell below the $2.95 per pound mark today.

On the mining front, Newmont Mining (NEM -0.03%) and Barrick Gold (GOLD 1.68%) were both victims of the general carnage today, falling 2.7% and 4.5% despite generally favorable comments from analysts at Credit Suisse. The two miners haven't seen their shares rise nearly as much as the Market Vectors ETF or even the price of gold so far in 2014, and analysts believe that conservative estimates and the potential for growth could send prices of the two miners higher relative to their peers. Yet those assessments rely on gold prices continuing to hold their recent gains, and if that doesn't happen, then miners across the industry could revisit their recent lows.

Finally, palladium managed to sustain its gains from last week, climbing modestly even on a bad day for the sector. Until the Russian situation gets resolved, palladium has the chance to outshine its better-known cousins among the metals, and that's positive news not only for bullion-ETF owners but also investors in the companies that produce platinum-group metals more generally.