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Are Gold Miners Worth Investing In?

By  +Follow June 12, 2014 1:53PM
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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.


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Results for gg
DailyStockPicks
30 Oct 14 23:29:40
Partner Jet $PJT.V is up 183% this week after Q3 release with more gains coming. Find out why: http://t.co/MEpEjkCm4H $GG $BSX $BOOT
Ticker Report
30 Oct 14 23:13:09
Goldcorp Reaches New 12-Month Low on Disappointing Earnings $GG http://t.co/NU16EawhfO
kam
30 Oct 14 23:12:46
$GDX look like taking a super train towards 2009 lows much faster than I posted on TTM post #13,14 http://t.co/maXHCpJWuP $gg $abx $GLD
Stock Signaling
30 Oct 14 23:01:38
Movers and Shakers: Trading on Major News: $WU $NEM $ABX $EXPE $GG $GRPN $ABC $TTWO $BWA $NOV $TASR $WLT $BG $V $MPC http://t.co/Vtx6dLy0Nw
Tom Loffman
30 Oct 14 21:37:29
Biggest losers today large caps: $GG -13.52% $BWA -4.38% $ABX -4.21% $CHRW -3.99% $INTC -3.95% $COG -3.83% $OKS -3.76% $KKR -3.69%
HotKeyTrading
30 Oct 14 21:30:06
Annual Lows: $PPP $ATK $ASGN $INVN $AEM $RGR $RDEN $GG $ARAY $NEM $RCAP $AMCC $WNC $SNY $XOOM http://t.co/Vv2VEn80mr #swingtrading #trader
MasterChartsTrading
30 Oct 14 21:23:03
GoldCorp $GG lost 13% today in a #gold miners share rout that took $GDX to its multi year low http://t.co/0qHnjdZjQP; http://t.co/NJhx4HEcLb
Vizimi Stocks
30 Oct 14 19:29:31
Thursday 10/30 #NYSE News: $GG closed down 15+% for the first time since October 2008 #stocks
Implosion1
30 Oct 14 18:43:11
RT @DougMcDougall: $GG Goldcorp -17.73% (NYSE) vs $GLD -2.37% since 01/02/2014 http://t.co/nlhnTGIapZ
Doug McDougall
30 Oct 14 18:42:19
$GG Goldcorp -17.73% (NYSE) vs $GLD -2.37% since 01/02/2014 http://t.co/nlhnTGIapZ
Aries Vigornia
30 Oct 14 18:41:32
RT @KitcoNewsNOW: Long-Term Lower #Gold Supply To Help Gold Prices – Goldcorp's Chuck Jeannes ▸ http://t.co/vqqrjxuxc1 | by @alex_letournea…
PK
30 Oct 14 18:21:28
$GG Wouldn't even get close to gold anytime soon Spot gold is still high worldwide
DailyStockPicks
30 Oct 14 18:10:31
Partner Jet $PJT.V is up 183% this week after Q3 release with much more room to increase. Find out why: http://t.co/MEpEjkCm4H $GLD $ABX $GG
gordon gekko is god
30 Oct 14 17:54:46
Goldcorp's (GG) CEO Charles Jeannes on Q3 2014 Results - Earnings Call Transcript http://t.co/b9Iir0iFq9 $GG
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30 Oct 14 17:00:12
Another round of Gold Meltdowns how far will these charts go? http://t.co/l3l8nEgLtS $GLD $GDX $ABX $AUY $GG
Glenn Stoyan
30 Oct 14 16:08:35
RT @KitcoNewsNOW: Long-Term Lower #Gold Supply To Help Gold Prices – Goldcorp's Chuck Jeannes ▸ http://t.co/vqqrjxuxc1 | by @alex_letournea…
Divya Balji
30 Oct 14 15:26:09
RT @liezelhill: Goldcorp CEO said today he sees a #gold price floor ~$1,200 on physical demand esp. in Asia (so basically things shldnt ge…
Sufiy
30 Oct 14 15:23:54
RT @KitcoNewsNOW: Long-Term Lower #Gold Supply To Help Gold Prices – Goldcorp's Chuck Jeannes ▸ http://t.co/vqqrjxuxc1 | by @alex_letournea…
Carlos Caminada
30 Oct 14 15:19:41
RT @liezelhill: Goldcorp CEO said today he sees a #gold price floor ~$1,200 on physical demand esp. in Asia (so basically things shldnt ge…
Liezel Hill
30 Oct 14 15:16:13
Goldcorp CEO said today he sees a #gold price floor ~$1,200 on physical demand esp. in Asia (so basically things shldnt get much worse) $GG
Investools
30 Oct 14 15:09:55
Credit cards charged higher, $V, $MA, a “Hole” lot of nothing for miners, $GG, $NEM http://t.co/R8c7poT7Dp
Baerrus Magnus
30 Oct 14 15:01:43
$GG down on 3x volume. Smells like mutual funds clearing their books http://t.co/I4xUYscIto
Ziad Abou Jamra
30 Oct 14 14:55:25
RT @DanielFitz4: @ziadaboujamra @htsfhickey Of the big boy gold miners, $GG comes to mind (Goldcorp, Inc.). Got ROCKED today (down -13.50%)…
Dan
30 Oct 14 14:42:14
@ziadaboujamra @htsfhickey Of the big boy gold miners, $GG comes to mind (Goldcorp, Inc.). Got ROCKED today (down -13.50%). Also may...
iSENTIUM
30 Oct 14 14:23:19
iSENTIUM Post-Market Sentiment Report: Breaking alerts on $BMY, $GG, $GRPN, $BIDU http://t.co/olG8pniF4c
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30 Oct 14 14:20:26
Goldcorp $GG Announces Quarterly Earnings Results, Misses Expectations By $0.09 EPS http://t.co/X0qyjps6ZF
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30 Oct 14 14:11:12
Thorns in the Market Today: $XLE $GLD $GDX $GG $AUY $INTC $BLL $AVP $TEX $PRXL $KMT $DBD http://t.co/I9AdflKFPr
The Stock Janitor
30 Oct 14 13:50:58
$GG down 14%?! What an early Christmas gift to those with the dry powder! Swiss vote soon and market/economy crash upcoming with end of QE.
Zarak Nisar Cheema
30 Oct 14 13:47:01
RT @KitcoNewsNOW: Long-Term Lower #Gold Supply To Help Gold Prices – Goldcorp's Chuck Jeannes ▸ http://t.co/vqqrjxuxc1 | by @alex_letournea…
Hal
30 Oct 14 13:42:13
RT @KitcoNewsNOW: Long-Term Lower #Gold Supply To Help Gold Prices – Goldcorp's Chuck Jeannes ▸ http://t.co/vqqrjxuxc1 | by @alex_letournea…
Kitco NEWS
30 Oct 14 13:40:42
Long-Term Lower #Gold Supply To Help Gold Prices – Goldcorp's Chuck Jeannes ▸ http://t.co/vqqrjxuxc1 | by @alex_letourneau $GG $G
aktien-boersen
30 Oct 14 13:36:13
$GG Expect #gold bounce: #Goldcorp CEO http://t.co/OCrqpw5eoE
Quantpost Basic Mats
30 Oct 14 13:26:12
$GG News: "A Few Thoughts On Goldcorp's Quarter $GG …" http://t.co/q3Ww3apV9r Board view: https://t.co/6tY4UDCPnH
Seeking Alpha
30 Oct 14 13:26:11
A Few Thoughts On Goldcorp's Quarter http://t.co/u8OWpkO6AE $GG
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30 Oct 14 13:25:36
$GG watching for bottom + bounce ~
Johnny Ca$h
30 Oct 14 13:17:58
Maybe it's just coincidence $GG chart https://t.co/2qt9tPHsGn
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30 Oct 14 13:13:25
See why these assets are trending in 1 watchlist $GRPN $EXPE $GG $ABT $LNKD http://t.co/c3vV9rfF81
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30 Oct 14 13:01:50
Goldcorp $GG Stock Lower Today After Third Quarter Earnings Results http://t.co/SKsnoOLA25
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30 Oct 14 13:00:50
MT Why It's Time to Invest in Goldcorp | The Motley Fool Canada http://t.co/f0wN85HGYb $GG Down 13.5% 3 days later https://t.co/UGWHOoYZCF
Oracle of Marlboro
30 Oct 14 13:00:25
At what point do Gold stocks bounce back? Goldcorp and Barrick are down so much. *long shares. $ABX $GG.
Anthony Allyn
30 Oct 14 12:59:14
If $GG continues to sell off below this pennant I may have to admit defeat. http://t.co/P7yJZZdMaz
okosa
30 Oct 14 12:58:04
: "They should have hedged their gold exposure three years ago. Shame on them." -Gartman on $GG just now
David Nohejl
30 Oct 14 12:52:29
WTF $GG $GDXJ
Forex Update
30 Oct 14 12:49:50
RT @Kelly_Evans: "They should have hedged their gold exposure three years ago. Shame on them." -Gartman on $GG just now @CNBC
Tony Patterson
30 Oct 14 12:45:11
RT @Kelly_Evans: "For the larger industry it's a challenge at these [gold] prices." $GG CEO Chuck Jeannes @CNBC
CNBC's Closing Bell
30 Oct 14 12:45:03
RT @Kelly_Evans: "They should have hedged their gold exposure three years ago. Shame on them." -Gartman on $GG just now @CNBC
OptionsTrader31
30 Oct 14 12:44:42
$GG $SLW $SM $DVN $SGY $OAS $SN $GDP As has been the case since Labor Day, shorts in commodity names work quite well despite mkt strength.
Kelly Evans
30 Oct 14 12:43:35
"They should have hedged their gold exposure three years ago. Shame on them." -Gartman on $GG just now @CNBC
Anand Shah
30 Oct 14 12:41:34
RT @OptionsTrader31: $GG Collapsing on huge volume after their report - miners getting knocked one after another.
Michael
30 Oct 14 12:40:03
Commented on StockTwits: Look at the Miners being Faded even harder into the Close here! $SLW $GG $AEM, they are ... http://t.co/a9PfNl43RE
				
				
By  +Follow June 12, 2014 1:53PM
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