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Fool's Gold Report: Precious Metals Rise, but Miners Drop

By Dan Caplinger – Feb 5, 2014 at 7:06PM

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Gold posted modest gains, but silver and palladium did even better. Find out why.

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.

Judging from the way that gold and the stock market have traded recently, investors who are unfamiliar with the precious metals markets might naturally assume that gold prices and stocks always move in opposite directions. But sometimes, the same things that support stocks also point to strength in gold and other metals, and today's price moves reflected some of those factors. Spot gold rose $3 per ounce to $1,258 today, sending the SPDR Gold Shares (GLD 0.09%) to a 0.25% gain. The iShares Silver Trust (SLV -0.45%) delivered a more impressive 1.7% gain, with the metal jumping $0.39 per ounce to $19.90. Platinum rose $5 per ounce to $1,376, while palladium jumped $8 per ounce to $707.

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

Admittedly, gold showed signs benefiting much more strongly when the stock market posted substantial losses right after the open, with a brief spike above the $1,270 level. But even as the Dow recovered to nearly break even, precious metals held onto much of their gains. One explanation came from the monthly ADP private-sector jobs report, which included lower employment figures than analysts had expected to see. With yet another data point suggesting an economic slowdown, many gold investors hope that the Fed will reverse course on its tapering policy and keep making sustained moves to stimulate the economy. Anything that keeps interest rates low and pushes more liquidity into the financial system could help support gold prices, as investors will have fewer alternatives to provide both income and growth potential.

But mining stocks posted big declines, with the Market Vectors Gold Miners Index (GDX -0.94%) falling 1.6%. Barrick Gold (GOLD -1.29%) led major gold miners down, falling 3% even in the aftermath of selling its minority stake in the Marigold mine in Nevada to Silver Standard Resources (NASDAQ: SSRI). Given that Silver Standard jumped 6% today, it's possible that investors saw the silver company as getting the better end of the deal at Barrick's expense.

Still, the disparity between mining stocks and bullion today is a troubling reversal of an earlier trend that established itself recently, when miners rose before bullion's recovery. If mining stocks retain their status as leading indicators, it could prove problematic for the sustainability of the rise in gold prices so far in 2014.

Dan Caplinger and The Motley Fool have 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.

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Stocks Mentioned

iShares Silver Trust Stock Quote
iShares Silver Trust
SLV
$19.72 (-0.45%) $0.09
Barrick Gold Corporation Stock Quote
Barrick Gold Corporation
GOLD
$16.02 (-1.29%) $0.21
SPDR Gold Trust Stock Quote
SPDR Gold Trust
GLD
$163.22 (0.09%) $0.14
Market Vectors Gold Miners ETF Stock Quote
Market Vectors Gold Miners ETF
GDX
$28.44 (-0.94%) $0.27

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

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