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.


Liked What You Read? Join Equities.com and Connect With Your Favorite Financial Experts FOR FREE! Members of Equities.com gain access to our leading financial news and content, active social investment community, proprietary research tools including the 2014 Small-Cap Stars, E.V.A. reports and more.

Results for gg
Wall Street
22 Nov 14 15:49:14
http://t.co/iQWRYqnOQl....Top penny stocks, NYSE, and NASDAQ trades from the stock market today. +296% last week. $GG $FITX $BMY
Mark Trader
22 Nov 14 12:20:17
Thanks to the pros at http://t.co/6cvEHBeuNR for the $TINO swing trade idea. Up 45% so far. $GG $FITX $BMY
Mark Trader
22 Nov 14 12:07:28
I banked over 200% in gains during my 14-day trial with http://t.co/6cvEHBeuNR. Their 5 guru traders are amazing. $GG $FITX $BMY
Wall Street
22 Nov 14 11:38:07
http://t.co/iQWRYqnOQl....Top penny stocks, NYSE, and NASDAQ trades from the stock market today. +296% last week. $CSCO $MU $ITUB $GG
PennyStocker
22 Nov 14 11:01:41
Wowser $ELED in breakout mode. Going long on the 8k news. $CSCO $MU $ITUB $GG
PennyStocker
22 Nov 14 10:00:39
Wowser $ELED in breakout mode. Going long on the 8k news. $CSCO $MU $ITUB $GG
Markos Kaminis
22 Nov 14 09:46:33
Commented on: "Gold Shorts Welcome Draghi To The Rescue" http://t.co/nyAlzyPhHH $GDX $GG $GLD $IEV
PennyStocker
22 Nov 14 08:47:44
Wowser $ELED in breakout mode. Going long on the 8k news. $GG $FITX $BMY
PennyStocker
22 Nov 14 08:42:38
$ELED is breaking out of bullish flag pattern today. Could be a big couple days here. $GG $FITX $BMY
PennyStocker
22 Nov 14 07:41:09
$ELED is breaking out of bullish flag pattern today. Could be a big couple days here. $GG $FITX $BMY
Wall Street
22 Nov 14 07:15:54
http://t.co/iQWRYqnOQl....Top penny stocks, NYSE, and NASDAQ trades from the stock market today. +296% last week. $CSCO $MU $ITUB $GG
Wall Street
22 Nov 14 05:50:57
http://t.co/iQWRYqnOQl....Top penny stocks, NYSE, and NASDAQ trades from the stock market today. +296% last week. $GG $FITX $BMY
PennyStocker
22 Nov 14 05:23:33
Wowser $ELED in breakout mode. Going long on the 8k news. $CSCO $MU $ITUB $GG
PennyStocker
22 Nov 14 00:17:33
$ELED is breaking out of bullish flag pattern today. Could be a big couple days here. $GG $FITX $BMY
Wall Street
21 Nov 14 21:18:03
http://t.co/iQWRYqnOQl....Top penny stocks, NYSE, and NASDAQ trades from the stock market today. +296% last week. $CSCO $MU $ITUB $GG
Dave
21 Nov 14 16:36:40
I didnt know the pro members get the opening bell alerts from http://t.co/qY5MPlJPrU 1 day early. $DNR $JCP $ATVI $SD $RAD $GG
PennyStocker
21 Nov 14 15:30:36
Wowser $ELED in breakout mode. Going long on the 8k news. $GG $FITX $BMY
PennyStocker
21 Nov 14 14:46:47
$ELED is breaking out of bullish flag pattern today. Could be a big couple days here. $GG $FITX $BMY
PennyStocker
21 Nov 14 13:49:21
$ELED is breaking out of bullish flag pattern today. Could be a big couple days here. $CSCO $MU $ITUB $GG
David Floyd
21 Nov 14 12:31:53
RT @Kapitall: Do not trust this man. #Gold might glitter, but the #stocks not so much $GG $ABX $KGC http://t.co/v8zf09XYNy http://t.co/Nv9M…
Kapitall
21 Nov 14 12:31:27
Do not trust this man. #Gold might glitter, but the #stocks not so much $GG $ABX $KGC http://t.co/v8zf09XYNy http://t.co/Nv9M5dxASo
PennyStocker
21 Nov 14 12:18:59
Wowser $ELED in breakout mode. Going long on the 8k news. $CSCO $MU $ITUB $GG
Chris Lau
21 Nov 14 12:10:04
Gold is shining—or is it? | $ABX $GG $KGC: http://t.co/CF9gyI19Z0
Mining HardAssets
21 Nov 14 11:47:31
Los Azules Copper: Canada's Goldcorp To Inaugurate Argentine 1.7 B Gold, Silver Mine In February. http://t.co/DJWzTA0YXt $GDX $GG
PennyStocker
21 Nov 14 11:23:39
$ELED is breaking out of bullish flag pattern today. Could be a big couple days here. $GG $FITX $BMY
PennyStocker
21 Nov 14 11:03:03
Wowser $ELED in breakout mode. Going long on the 8k news. $GG $FITX $BMY
PennyStocker
21 Nov 14 10:47:48
Wowser $ELED in breakout mode. Going long on the 8k news. $CSCO $MU $ITUB $GG
lookn4wins
21 Nov 14 10:41:45
GG 20.4701 Stock Charts $GG Goldcorp Inc. (NYSE) Any opinions on GG? Please reply to this post. Last Updated: http://t.co/KVdnRsal1Z
Investors Hangout
21 Nov 14 10:37:51
jim50: $GG Close Date=Nov-21-2014 Open=21.12 High=21.16 http://t.co/6WvMIJ6RS0
Investors Hangout
21 Nov 14 10:37:44
jim50: $GG Close Date=Nov-21-2014 Open=21.12 High=21.16 http://t.co/mCcoNrUEaT
Joshua Payne
21 Nov 14 10:34:37
RT @Jim5011: $GG Close Date=Nov-21-2014 Open=21.12 High=21.16 Low=20.69 Close=20.79 Volume=2335161 http://t.co/Hw2Ht3w2hQ
jim50
21 Nov 14 10:30:45
$GG Close Date=Nov-21-2014 Open=21.12 High=21.16 Low=20.69 Close=20.79 Volume=2335161 http://t.co/Hw2Ht3w2hQ
Kirill Klip
21 Nov 14 10:27:22
Los Azules Copper: Canada's Goldcorp To Inaugurate Argentine 1.7 B Gold, Silver Mine In February. http://t.co/9FojcNT3zt $GDX $GG
Investors Hangout
21 Nov 14 10:23:04
DennyT: BBY Insider Transactions $BBY $MU $HYG $SMH $GG http://t.co/mA33HHp9CE
Investors Hangout
21 Nov 14 10:23:04
DennyT: BBY Insider Transactions $BBY $MU $HYG $SMH $GG http://t.co/EK7Qc99IOP
Sufiy
21 Nov 14 10:12:45
RT @kirillklip: Los Azules #Copper: Canada's Goldcorp To Inaugurate Argentine Gold, Silver Mine In February. http://t.co/9FojcNT3zt $GG $T…
iHangout
21 Nov 14 10:05:11
http://t.co/vVojvWiBbX DennyT: HDOG HUB: BBY Insider Transactions $BBY $MU $HYG $SMH $GG http://t.co/6ueElUU0FZ
Sufiy
21 Nov 14 10:03:08
RT @TNR_Gold: Mining M&A in Latin America, #China And Prospects For #Copper Supply. http://t.co/KTdzl2UOB3 $TRRXF $MUX $FCX $GDX $BHP $GG
RespectTheTape
21 Nov 14 09:55:54
#stocksmidday $CNQ $SU $ECA pairing gains after $CL_F sell-off; continued selling in $GDX $GDXJ $ABX $GG; reverse H&S breakout in $TCK
Kirill Klip
21 Nov 14 09:26:39
RT @TNR_Gold: Mining M&A in Latin America, #China And Prospects For #Copper Supply. http://t.co/KTdzl2UOB3 $TRRXF $MUX $FCX $GDX $BHP $GG
PennyStocker
21 Nov 14 09:24:51
$ELED is breaking out of bullish flag pattern today. Could be a big couple days here. $GG $FITX $BMY
TNR Gold Corp
21 Nov 14 09:14:19
Mining M&A in Latin America, #China And Prospects For #Copper Supply. http://t.co/KTdzl2UOB3 $TRRXF $MUX $FCX $GDX $BHP $GG
danrocks
21 Nov 14 09:02:11
$SLTD On Radar $GTATQ $UA $USO $ARUN $GG http://t.co/YvwQbT8m4D
danrocks
21 Nov 14 08:51:52
$PBR On Watch $GLD $FEYE $GG $EEM $ITB http://t.co/gJsBywfPlD
Kirill Klip
21 Nov 14 08:48:02
Mining M&A in Latin America, #China And Prospects For #Copper Supply. http://t.co/XQnz4UeZYD $TRRXF $MUX $FCX $GDX $BHP $GG
PennyStocker
21 Nov 14 08:46:32
$ELED is breaking out of bullish flag pattern today. Could be a big couple days here. $CSCO $MU $ITUB $GG
PennyStocker
21 Nov 14 08:43:32
Wowser $ELED in breakout mode. Going long on the 8k news. $GG $FITX $BMY
Mark Trader
21 Nov 14 08:22:40
I banked over 200% in gains during my 14-day trial with http://t.co/6cvEHBeuNR. Their 5 guru traders are amazing. $GG $FITX $BMY
Dave
21 Nov 14 08:19:59
I didnt know the pro members get the opening bell alerts from http://t.co/qY5MPlJPrU 1 day early. $DNR $JCP $ATVI $SD $RAD $GG
Wall Street
21 Nov 14 08:08:20
http://t.co/iQWRYqnOQl will not help you lose weight...but it will help you make money trading. Enjoy! $CSCO $MU $ITUB $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.