Gold Stocks (GDX) Dip, Money Moving into Platinum Stocks Next

Gold stocks dipped Monday as the Market Vectors Gold Miners ETF (GDX) fell 0.1% to $61.41 0.93 to $61.55 per share.  Gold stocks and the GDX were pressured by a sell-off in gold bullion, which fell $23.85 to $1,803.82 per ounce as risk aversion subsided in financial markets.  Canada’s leading basket of gold stocks, the S&P/TSX Global Gold Index, retreated 0.2% alongside the GDX.

With today’s slight weakness in gold stocks, the GDX cut its year-to-date gain to just 1.2%.  Gold stocks have significantly underperformed the yellow metal in 2011, which has surged 26.9% year-to-date.  Furthermore, the GDX has failed on numerous occasions to confirm the new record highs in gold this year.  The gold stocks ETF reached its all-time high of $64.62 on December 7, 2010, when gold was trading near $1,430 per ounce.

With gold stocks lagging gold bullion, other precious metals have garnered increased attention.  Platinum, which provides a hedge against ongoing currency debasement as well as exposure to economic growth in emerging markets through its industrial uses, has been the subject of a number of bullish reports by industry analysts.

GFMS, the world’s leading metals consultancy firm, forecasted in its most recent Platinum and Palladium Survey that platinum will be “comfortably north” of $1,900 per ounce by the end of 2011.  With the metal currently trading near $1,825 per ounce, the firm’s prediction represents a considerable increase from present levels.

While there are many publicly-traded gold stocks, there exist only a small number of companies focusing on the production of platinum.  One emerging company in this sector is Platinum Group Metals (PTM.TSX, PLG: AMEX), which began to receive significant attention after legendary investor George Soros acquired a sizeable position.

Platinum Group Metals owns a 74% interest in the Western Bushveld Joint Venture (WBJV) in South Africa, which lies next to a belt that makes up 70% of the world’s current platinum production.  Since October 2008, the company has provided investors with considerable leverage to the platinum price, having surged 128.3%.

This morning, Platinum Group Metals announced that an additional $500,000 will be invested in a follow up drilling program on the North Limb of the Bushveld Complex where the Company has two joint ventures with the Japanese Oil and Gas Mineral Exploration Company known as “JOGMEC.”  Drilling with two machines will target a 10 kilometer stretch of the Bushveld Complex hosting the Platreef horizon on the Company’s Waterberg Project that, to the Company’s knowledge, has never been tested with drilling in this location. New models on the North Limb Platreef horizon are evolving with accelerating Japanese investment in a number of projects recently.

R. Michael Jones, President and CEO of Platinum Group Metals, commented that “The exploration investments into the North Limb, combined with our global bank syndicate mandate for $260m in the Western Limb (announced August 2, 2011) confirm that large scale investors see South Africa as open for business and mining.”

Gold stocks in the news on Monday included AuRico Gold (AUQ), which announced that it entered into a definitive agreement to acquire Northgate Minerals (NXG).  The combined company is expected to production 730,000 gold equivalent ounces in 2013.  In morning trading, NXG surged 37.5% to $4.33.  AUQ fell alongside gold stocks and the GDX, by 12.5% to $12.18 per share.

Other notable gold stocks moving lower included GDX components AngloGold Ashanti (AU), Yamana Gold (AUY), and Newmont Mining (NEM).  AU, AUY, and NEM declined 0.5%, 0.8%, and 0.2%, respectively.