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Fool's Gold Report: Spot Gold Falls $6 As Industrial Metals Outperform

By Dan Caplinger – Jan 7, 2014 at 7:15PM

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After climbing substantially to begin 2014, gold prices corrected a bit today but still held onto most of their gains. Meanwhile, palladium once again demonstrated its strength. Find out about metals here.

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.

2014 has been a good year for gold so far, but today, the yellow metal gave up a bit of ground. Spot gold finished the day down $6 to $1,232, with analysts pointing to a stronger U.S. dollar in the aftermath of positive trade-deficit data this morning. A lack of inflationary pressure among developed-world countries and some concerns about central-bank meetings and the Fed's release of meeting minutes also weighed on the market. SPDR Gold Shares (GLD 0.90%) fell 0.6% in reflecting the drop, but silver took the brunt of the damage, declining $0.32 per ounce to $19.85. iShares Silver Trust (SLV 2.35%) fell 1.5% in sympathy, although volume was somewhat subdued compared to yesterday's levels.

Surprisingly, mining stocks fared reasonably well. The Market Vectors Gold Miners ETF (GDX 1.94%) actually gained 0.2% today, with Yamana Gold (AUY 2.56%) leading the way with a 1.2% gain. Yamana has cost advantages over many of its mining peers, and that often lends itself to outperformance even on tough days for the sector. Even in the harder-hit silver market, losses for major silver miners were modest, with Hecla Mining losing less than 0.2% on the day.

Industrial metals had better fortune for investors today, with palladium climbing $3 to $740 per ounce while platinum remained flat at $1,413. Copper prices also gained today, remaining near their best levels since early 2013. The moves for industrial metals are consistent with better economic news today, as hopes for improving economic conditions around the world could finally pull the struggling commodities industry out of its tailspin from early 2013. Until that turnaround takes place, though, many marginal mining stocks will face big challenges to survive without taking dramatic strategic action that could affect their financial prospects for years to come.

As earnings season kicks off later this week, the big question for mining stocks will be the extent to which further asset writedowns surprise investors. As long as shareholders are realistic about the need for their respective companies to adjust their price views, the gold market might be able to consolidate its recent gains and avoid further deterioration. But if investors let themselves get blindsided by accounting adjustments, falling mining stocks could bring another leg down for gold in the coming weeks.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. 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.

Stocks Mentioned

Yamana Gold Stock Quote
Yamana Gold
AUY
$5.62 (2.56%) $0.14
iShares Silver Trust Stock Quote
iShares Silver Trust
SLV
$20.92 (2.35%) $0.48
SPDR Gold Trust Stock Quote
SPDR Gold Trust
GLD
$166.33 (0.90%) $1.49
Market Vectors Gold Miners ETF Stock Quote
Market Vectors Gold Miners ETF
GDX
$29.41 (1.94%) $0.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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