GOLD STOCKS NEWS – Gold stocks rallied Monday as the Market Vectors Gold Miners ETF (GDX) climbed 0.9% to $55.93 per share. Strength in gold stocks and the GDX came as gold futures reached a new all-time record high of $1,718.20 per ounce after S&P downgraded the U.S. credit rating from AAA to AA+. The S&P/TSX Global Gold Index, Canada’s leading basket of gold stocks, added 1.2% alongside the GDX.
Despite today’s advance in gold stocks, the GDX has fallen noticeably in recent weeks in concert with the broader equity markets. Commenting on weakness in gold stocks, CIBC analyst Barry Cooper wrote in a note to clients that “Gold stocks will trade as stocks first and as gold investments second. Evidence of this occurred on Friday as markets were down and gold was initially up yet the gold companies were following the market not the gold price. While the entire group moved somewhat in unison, this is not always the case.”
Cooper went on to say that “The probability of a gold stock performing well in this environment may be related to its market capitalization. In 2008 when gold hit its low on November 27th, the S&P continued to slide for three more months until March 9, 2009. During that period, gold bullion rose 13% and so did the gold equities. The lack of beta however can be correlated with the market capitalization of companies as in general the bigger they were the worse their performance.”
“What’s interesting is political risk didn’t seem to hold back some of the winners in terms of performance during this rally, reinforcing our view that the market is willing to pay for growth,” Cooper continued. “So who has the near term growth this time around? Eldorado (EGO), Centerra (CG.TSX), Alamos (AGI.TSX), Osisko (OSK.TSX) (near term start up risk though), Kirkland Lake Gold (KGI.TSX), and even Goldcorp (GG).”
In morning trading, GDX components EGO and GG outperformed most gold stocks, rising 3.1% and 1.3%, respectively. As for the Canadian-listed gold stocks highlighted by CIBC, AGI.TSX advanced 5.0%, CG.TSX dropped 2.1%, KGI.TSX added 0.7%, and OSK.TSX climbed 0.5%.
Other notable gold stocks moving higher on Monday included GDX components Agnico-Eagle Mines (AEM), Newmont Mining (NEM), and Royal Gold (RGLD). In morning trading, AEM, NEM, and RGLD advanced 1.4%, 2.3%, and 1.2%, respectively.