The Motley Fool Previous Page

Fool's Gold Report: As Stocks Plunge, Why Isn't Gold Soaring?

Dan Caplinger
April 7, 2014

After a strong Friday, gold investors had hoped that continued stock market pressure would lead to a bigger rebound for gold and other precious metals Monday. But even though stocks dutifully dropped, gold refused to play its part, falling back below the $1,300 mark and sending SPDR Gold Shares (NYSEMKT: GLD) lower despite what would ordinarily have been favorable concerns about the volatile situation in Ukraine. With the notable exception of Newmont Mining (NYSE: NEM), gold-mining stocks largely followed the metal lower, and it's increasingly unclear what will propel gold further after an encouraging start to 2014.

Falling back through $1,300
June gold futures lost more than $5 per ounce Monday, settling at $1,298.30 and contributing to SPDR Gold Shares' drop of about half a percent. Silver had a more modest pullback, dropping just $0.04 per ounce to $19.91 for the May futures contract. Platinum-group metals suffered the biggest plunge, with palladium dropping nearly 3% on the day.


Today's Spot Price and Change From Previous Day


$1,297, down $5


$19.90, down $0.06


$1,421, down $23


$765, down $21

Source: Kitco. As of 4 p.m. EDT.

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

Gold has stopped acting like the safe haven that it offered earlier in the year, as a combination of factors make it a less than ideal way to protect against the various risks hitting the investing world right now. Although gold often rises in times of geopolitical strife, the uncertainties about the impact of possible economic sanctions against Russia on the precious-metals markets are substantial enough to make investors question whether gold could rise this time. Similarly, even if interest rates stay low longer than expected, everyone's looking for a rise at some point, and that will keep long-term investors nervous about owning gold.

Still, even investors who are bearish about the prospects for bullion prices aren't convinced that mining stocks aren't a good bargain. Newmont Mining was the most important example today, with an analyst upgrading the stock from sell to neutral based largely on a less pessimistic assessment of future declines for gold. With expectations so low in the space, even warnings of a possible need for New