Fool's Gold Report: Why Metals and Miners Moved in Opposite Directions Friday

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.

Usually, you can count on mining stocks to move in the same direction as the prices of the metals they produce. Yet today, we saw an unusual disparity between the two markets, as gold, silver, and the platinum-group metals all posted modest spot-price gains, but the Market Vectors Gold Miners ETF (GDX 0.60%) fell by half a percent. Admittedly, gold's gains weren't all that strong, as even though April gold futures finished the day up about 0.5% to settle at $1,323.60 per ounce, the SPDR Gold Shares (GLD 0.34%) fell modestly on the day. Similarly, minimal gains of about half a percent, to $21.815 per ounce in March silver futures, left the iShares Silver Trust (SLV 0.04%) down slightly.

Source: Kitco. As of spot-market close.

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

The wild card for mining stocks: earnings
The big move in the mining sector came from Newmont Mining (NEM -0.03%), which fell more than 4% after releasing earnings that didn't impress investors. Like just about every other miner in the industry, Newmont suffered big declines in revenue as a result of the plunge in gold prices, and asset impairments forced the company to report a net loss of about $1.2 billion.

Yet, focusing on news that we've known since last April would come for Newmont and its peers isn't a smart way to assess a company as an investment. CEO Gary Goldberg said that the company has plenty of interesting projects in development that could add more than 1.5 million gold ounces to Newmont's production relatively quickly. That would only put a small dent in the 11% drop in reserves that Newmont reported as a result of falling gold prices, but it nevertheless would move the company's prospects back in the right direction.

The challenge, though, is whether Newmont can afford to gamble on whether the recent gold rebound will continue. Even though all-in sustaining costs fell more than 6% in 2013, costs of $1,100 per ounce don't leave Newmont with much room for error if gold starts falling further.

Still, not every miner fell today. On the silver side, Pan American Silver (PAAS 0.85%) climbed 1.4% after getting an analyst upgrade and price-target boost from TD Securities. Even though the company took another impairment charge at its La Dolores silver mine when it announced earnings Thursday morning, Pan American Silver hopes that the current impairments will be the last it has to take. The results aren't surprising given the plunge in silver prices, but what is more interesting is that the company actually boosted its proven and probable silver reserves despite the price declines due to its exploratory activity.

Next week, gold investors should watch to see if the yellow metal can build on its recent gains. Although a brief pause wouldn't necessarily mean the end of the run, the magnitude of 2013's drop makes it important for gold to get back a good reputation in the eyes of investors in order for its gains to continue.