An exchange traded fund that invests in gold miner stocks dropped to a new 52-week low on Tuesday, falling along with bullion prices in March.
Miner stocks have trailed gold prices in recent years. Investors are walking away from gold producers and moving into bullion ETFs, pushing valuations to a record low versus the overall market, Matt Walcoff reports on Bloomberg.
“Buying gold and ETFs tracking bullion prices such as the $69 billion SPDR Gold Shares (NYSEArca: GLD) has become increasingly popular for investors as companies struggle to develop mines in remote locations and pay higher operating costs,” according to the article. [Gold Miner ETFs May be Near Turning Point]
Within Canada’s S&P/TSX Composite Index, gold shares lost 28% last week from their high last September. [Gold, Silver ETFs Tumble on Bernanke]
High operating costs are hitting miners where it counts. Agnico-Eagle Mines of Canada lost 43% since October. This was after the company wrote down $644.9 million due to “persistently high” operating costs. [The Case for Junior Gold Miner ETFs]
“Thus far into 2012, gold is up 6.12 % , while the miners have fallen an average of 3.41 %. Moreover, over the last six months some miners are down 14.66 %, while gold is down 8.36 %, reports ZVI Bar on Seeking Alpha.
Risks that mining companies face that do not affect gold prices are geographical risk, political risk, mine productivity issues, weather, fraud and management problems. However, going forward, any further rise in gold prices should prove favorable for mines. [Gold Miner ETFs Lose Their Luster]
Many gold mining share are selling off at a leveraged rate compared to the actual metal. If gold prices stay where they are at or rise, the gap between gold prices and miners should even out.
- Market Vectors Gold Miners ETF (NYSEArca: GDX)
- Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ)
Market Vectors Gold Miners ETF
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.