Fool's Gold Report: Bullion Breaks $1,300, but Hecla, Pan American Move Higher

Gold fell below the key $1,300 level Thursday, raising new fears about whether the yellow metal's rally to begin 2014 is now over. Yet, mining companies fared well today, with silver specialists Hecla Mining (NYSE: HL  ) and Pan American Silver (NASDAQ: PAAS  ) posting solid gains of around 2% Thursday. What explains the disconnect that sent SPDR Gold Shares (NYSEMKT: GLD  ) down, but Market Vectors Gold Miners (NYSEMKT: GDX  ) up?

How metals moved today
In the futures markets, April gold fell almost $9 per ounce to settle at $1,294.70, while May silver fell another $0.07 per ounce, to $19.71, in lackluster trading. Most traders attributed the action Thursday to technical factors, with no strong fundamental news supporting a turnaround in the recent pullback in bullion prices. Palladium plunged, following its recent foray above the $800 per ounce mark with a sharp decline of 3% today.

Metal

Today's Spot Price and Change From Previous Day

Gold

$1,292, down $14

Silver

$19.70, down $0.04

Platinum

$1,394, down $6

Palladium

$756, down $23

Source: Kitco. As of market close.

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

Yet, the positive sentiment among silver miners showed just how uncertain investors are about whether bullion prices truly reflect the future of precious metals. Last night, Pan American Silver posted its fourth-quarter results, with revenue plunging 22% due to the big drop in silver and gold prices from last year's levels. Pan American also took a huge impairment charge related to the bullion price declines, leading to a loss for the fourth quarter.

One thing is clear to those who've followed the sector closely: The headwinds that hurt Pan American's results, as well as those of countless other silver miners, aren't exactly news. Indeed, after one more round of quarterly earnings, the terrible comparisons that resulted from the April 2013 plunge in gold and silver prices will finally end, allowing year-over-year figures to look a lot more favorable. That, in itself, won't help Pan American, Hecla, or other gold and silver miners get back to their pre-plunge earnings levels, but it could mark a turning point for investors if gold and silver prices are able to sustain their current levels rather than falling even further in 2014.

The key to understanding the potential divergence between bullion ETFs, like SPDR Gold, and mining stock investments, like the Market Vectors Gold Miners ETF, is that the focus of investors in each market is different. Bullion might well languish for months to come, but mining stocks will reflect the views of investors about precious-metals prices years into the future. Especially after their huge declines in 2013, mining stocks might well climb, even if the metals themselves do nothing more than sustain their current price levels.

3 stocks that could become your next huge winner
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have done it before, and now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2893862, ~/Articles/ArticleHandler.aspx, 9/16/2014 3:34:34 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement