logo  
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

Are Gold Miners Worth Investing In?

By  +Follow June 12, 2014 1:53PM
Share:
Tickers Mentioned:

gold stocks buy now, best gold stocks, gold prices buying opportunity, is gold a good investmentGold mining stocks were hammered last year as gold prices fell almost 30%. Investments in gold fell as investors pulled money out of exchange traded funds. This was mainly due to the fact that the U.S. Federal Reserve indicated that it will start winding up its quantitative easing program. The Fed has already started easing its bond purchases this year, however, surprisingly gold and gold mining stocks have performed well. So are gold miners worth investing in after last year’s sharp decline?

Gold Mining Stocks Hammered

In 2013, gold mining stocks registered steep losses. Shares of Goldcorp (GG) , one of the biggest gold mining companies, tumbled almost 40%. Another major miner, Barrick Gold Corporation (ABX) fell nearly 50%. Newmont Mining Corporation  (NEM) also saw a 50% drop in its shares. The interesting thing is that the drop in gold mining stocks was significantly higher than those seen in gold itself. Gold fellaround 30% last year.

Gold and Fed

Gold prices fell in 2013, ending over a decade-long rally in the precious metal. The drop in gold was sparked by speculation that the Federal Reserve might start easing its bond purchase program, which is also known as quantitative easing.

The Fed first launched its quantitative easing program or QE shortly after the financial crisis of 2009. The first and second rounds of QE sparked a rally in gold. The third round of QE, which was announced in 2012, saw gold jump to an all-time high levels. However, in May 2013, the improving U.S. economy raised speculation that the Fed might start easing its bond purchases. The speculation was further fueled by comments from the then Fed Chairman Ben Bernanke.

This was enough to spark a sell-off in gold prices as investors pulled money out of ETFs.

Gold’s Surprisingly Strong Performance in Early 2014

The Fed began winding up its quantitative easing program in January this year. However, surprisingly, gold performed well in the first quarter of 2014. The precious metal was helped by the crisis in Ukraine, which boosted its safe-haven appeal. But, another major factor that helped gold was strong physical demand, especially in China.

The sharp decline in gold prices last year boosted physical demand for gold in China, which even overtook India as the world’s biggest consumer of gold. This factor has meant that gold now has a strong floor at around $1,200.

What This Means For Gold Mining Stocks

A strong floor for gold prices provides a great deal of stability to miners. In fact, miners are expected to generate positive cash flow this year. Not surprisingly, gold mining stocks performed well in the first two months of 2014. Their performance has since been disappointing; however, the outlook for gold mining stocks has certainly improved since last year.

This year we have also seen increased M&A activity in the gold mining sector. Earlier in the year, Goldcorp offered to acquire Canadian gold miner Osisko. Goldcorp had to eventually drop its bid for Osisko as the Canadian miner opted for a rival offer.  Another major deal that didn’t materialize in the end was the merger between Barrick Gold and Newmont Mining. The two companies had been discussing a merger earlier in the year; however, talks eventually fell apart.

It is likely that we will see more deals in the gold mining sector as the year progresses. This is because gold prices do not have significant upside as the Fed continues to ease its bond purchases. Any growth that miners will see will come from acquisitions that will boost production.

The big question then is whether after last year’s debacle are gold mining stocks worth investing in. Gold price has a strong floor now and miners have cut their costs. Add to this the fact that the sector could increase in M&A activity. Given these factors, the sector is certainly looking attractive again.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


Signup for our daily newsletter and get our best articles emailed right to you!

Results for gg
Chasing Stars
24 Oct 14 15:15:37
$GG Dividend Click Here: http://t.co/NxN3KHzVqh Also See: $DGLY $COP $TD.TO $AEM ~
Investors Hangout
24 Oct 14 15:08:54
$GG Financials Click Here: http://t.co/25x3seNXj1 Also See: $COST $CLF $SLW $JDST ~
Stock Forums
24 Oct 14 15:06:21
$GG Change Click Here: http://t.co/65yFrVvDYZ Also See: $NKO.TO $WLOC $SLW $XOM ~
Investors Hangout
24 Oct 14 15:02:03
$GG Summary Click Here: http://t.co/eu5Rg8v1jD Also See: $AXP $BIIB $XLI $ACHN ~
Stock Forums
24 Oct 14 14:57:08
$GE Prev Close Click Here: http://t.co/JTPF9XAwOL Also See: $TVIX $LUV $GG $SFOR ~
Eastern Numismatics
24 Oct 14 11:57:55
RT @SeekingAlpha: Commodities Today: Gold And Oil Under Pressure http://t.co/n7LCUzisJq $ABX $AUY $GG $GLD $NEM
Dividend Yield
24 Oct 14 11:46:09
15 Higher Capitalized Monthly Dividend Paying Stocks - http://t.co/xOUPWNFmiU - $O $BTE $GG $PBA $PGH $BBDO $PSEC $MFG $ARCP $ITUB $SJR
Alysia Sarkisian
24 Oct 14 10:56:26
RT @SeekingAlpha: Commodities Today: Gold And Oil Under Pressure http://t.co/n7LCUzisJq $ABX $AUY $GG $GLD $NEM
Investors Hangout
24 Oct 14 10:56:02
$EBAY Message Board Posts Click Here: http://t.co/IVR3PZs7yc Also See: $GG $COHO $CENX $ANR ~
Quantpost Basic Mats
24 Oct 14 10:50:02
$ABX $GG $NEM News: "Commodities Today: Gold And Oil Under Pressure $ABX $AUY …" http://t.co/nFWiP9aML6 Board view: https://t.co/Apk6xpCPaE
Seeking Alpha
24 Oct 14 10:50:00
Commodities Today: Gold And Oil Under Pressure http://t.co/n7LCUzisJq $ABX $AUY $GG $GLD $NEM
Casey Murphy
24 Oct 14 10:32:52
Falling price of gold is taking its toll on the mining giants. Here is an article with more detail: http://t.co/XTV8YslWiw $GG $ABX #Gold
StockSpotter
24 Oct 14 09:29:19
$GG up 0.7% to 22.48 after bullish trade setup #stocks #options #trading http://t.co/OoKuMusEpZ
InterCooler
24 Oct 14 08:48:42
Citigroup Inc. Reaffirms “Buy” Rating for Goldcorp $GG http://t.co/R0el7DRgp3
Catalina Velasquez G
24 Oct 14 06:59:25
$GG se pone linda #Stocks #SimuladordeTradingMet
Investors Hangout
24 Oct 14 05:01:06
$BAC Change Click Here: http://t.co/dAyA2Dy7Jo Also See: $TRTC $DIA $GGAL $GG ~
Stock Forums
24 Oct 14 03:39:20
$AMZN Company Info Click Here: http://t.co/VbhGdk5gr9 Also See: $TKMR $GG $MINE $UNGS ~
Investors Hangout
24 Oct 14 02:41:32
$ABX Filings Click Here: http://t.co/ZmUbz47Nli Also See: $VOIS $GG $TRN $FNV.TO ~
Investors Hangout
23 Oct 14 22:13:23
$MTVX Ex-Div Date Click Here: http://t.co/DcahanK9t0 Also See: $GG $TRTC $DIS $QID ~
DailyStockPicks
23 Oct 14 22:09:41
During this #Ebola outbreak, $GG investors will also want to buy $SMED. They handle medical and hazardous waste http://t.co/vTV3wPBONo
Chasing Stars
23 Oct 14 21:58:01
$MJNA Day High Click Here: http://t.co/iBNSB07EDy Also See: $XHB $DRYS $AXP $GG ~
Chasing Stars
23 Oct 14 17:24:11
$ALL Volume Click Here: http://t.co/FeMGthGbcz Also See: $GG $BIDU $IYT $SBOTF ~
G. Thomas Lackey Jr
23 Oct 14 16:54:00
October 23, 2014 RS Movers http://t.co/rxnTBee8od $ITB $IYZ $CBST $ALK $LCRX $SWKS $DHI $PHM $CCL $TXT $GG $YELP $IBM $NEM
Langan Stocks
23 Oct 14 15:48:44
$ILMN EOD Data Click Here: http://t.co/oo47Nk5Dqe Also See: $GLD $GG $XIV $WMT ~
Bail O'Nomics
23 Oct 14 13:55:04
What The Gold Silver Ratio at 72:1 Looks Like $GLD $SLV $ANV $SLW $JNUG $EXK $ABX $IAG $NUGT $GDX $NEM $AGQ $GG $ZSL http://t.co/bgH3SkaRNq
Stock Relay
23 Oct 14 13:45:13
$PAL Company Info Click Here: http://t.co/2jEihCUJp2 Also See: $AKRX $ISIS $PLUG $GG ~
FlashRatingsHOT
23 Oct 14 13:18:50
$GG has 3 analyst ratings in the last 7 days and 100% are positive. Median target: $31.5 (41% upside) https://t.co/heaaPgX9jW #GG
US Banking News
23 Oct 14 13:04:38
Citigroup Inc. Reaffirms “Buy” Rating for Goldcorp $GG http://t.co/7E909CNlW2
Sleek Money
23 Oct 14 12:38:14
Goldcorp Stock Rating Reaffirmed by Citigroup Inc. $GG http://t.co/pgMqEhum7v
Langan Stocks
23 Oct 14 12:15:47
$GG Day High Click Here: http://t.co/sqByyApgiZ Also See: $COP $NFLX $JNUG $CREE ~
FrontierMetrix
23 Oct 14 11:29:27
RT @SeekingAlpha: Russians Make Largest Gold Purchase In 15 Years: What Does It Mean For Gold Investors? http://t.co/U9jtE5Vw91 $AEM $GG $N…
Alysia Sarkisian
23 Oct 14 11:26:37
RT @SeekingAlpha: Russians Make Largest Gold Purchase In 15 Years: What Does It Mean For Gold Investors? http://t.co/U9jtE5Vw91 $AEM $GG $N…
John Constantine
23 Oct 14 11:24:47
"@CPCharts: $JNUG Short $EGO $GOLD $GG $SLW $GFI $SLV these PIGS are 50% Overvalued - Most going BK"
Quantpost Basic Mats
23 Oct 14 11:19:10
$GG News: "Russians Make Largest Gold Purchase In 15 Years: What Does It Mean…" http://t.co/YSl52ViMph Board view: https://t.co/JuPiKgwfF7
Seeking Alpha
23 Oct 14 11:19:09
Russians Make Largest Gold Purchase In 15 Years: What Does It Mean For Gold Investors? http://t.co/U9jtE5Vw91 $AEM $GG $NEM $GLD $AG
Langan Stocks
23 Oct 14 10:37:08
$F Last Trade Click Here: http://t.co/Y3QYYhn4Iv Also See: $GG $GOOG $KNDI $BABA ~
IH News Desk
23 Oct 14 09:40:51
$ERX EOD Data Click Here: http://t.co/f6DXvcf0ks Also See: $GG $ERX $FXI $CERS ~
John Constantine
23 Oct 14 09:22:53
$JNUG Short $EGO $GOLD $GG $SLW $GFI $SLV these PIGS are 50% Overvalued - Most going BK
IH News Desk
23 Oct 14 07:14:26
$DGAZ Chart Click Here: http://t.co/0tcx8mQpd3 Also See: $GG $WFC $GE $AEM ~
Bradley Urias
23 Oct 14 05:26:26
#Gold falls on eve of #Diwali, demand plummets - The #Times of #India http://t.co/18Z3tBfULy $1050 $GLD $GC $IAU $GDX $NUGT $ABX $GG $DUST
Langan Stocks
23 Oct 14 04:49:47
$CPE Financials Click Here: http://t.co/SbgC0mPRxs Also See: $YELP $TRTC $TQQQ $GG ~
Stock Relay
23 Oct 14 04:08:01
$GG Day Low Click Here: http://t.co/aGTZBawpQi Also See: $HVU.TO $JNUG $VTI $MINE ~
Stock Relay
23 Oct 14 04:01:38
$GG Day Low Click Here: http://t.co/r6NG8u38EG Also See: $NUGT $IJJP $PFE $EWZ ~
Stock Relay
23 Oct 14 03:51:50
$GG 52Wk Low Click Here: http://t.co/VCPrxJM8Lc Also See: $TZA $IJJP $NKO.TO $FNV.TO ~
Stock Relay
23 Oct 14 03:29:21
$GG Ideas Click Here: http://t.co/CIvndB1lbK Also See: $SSYS $FXI $AEP $RSX ~
Stock Relay
23 Oct 14 00:57:52
$EUO Exchange Click Here: http://t.co/dZgpKmT8n0 Also See: $XHB $GG $FITX $SCTY ~
Stock Relay
22 Oct 14 19:07:24
$CLF Financials Click Here: http://t.co/B12qjwNfd5 Also See: $TNA $DGLY $GG $UUP ~
Stock Relay
22 Oct 14 18:11:21
$CAT Message Board Posts Click Here: http://t.co/usIL8XSCDZ Also See: $GG $EWRS $FVI.TO $KORS ~
Colin Macleod
22 Oct 14 16:39:34
Rough day, but healthy day traders here are you intra-day bounce plats for Oct 23 http://t.co/ytVz55cpAh $XRX $CREE $GDXJ $NGD $NUGT $GG
Stock Relay
22 Oct 14 16:22:31
$AXP Last Trade Click Here: http://t.co/G5JlzkYXkj Also See: $DSCR $QLD $UPRO $GG ~
				
				
By  +Follow June 12, 2014 1:53PM
Share:

Comments

 

blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.