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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
PolgarStocks
27 Feb 15 18:51:08
$CSCO Filings Updated Friday, February 27, 2015 9:07:07 PM $MNST $GG $GDXJ $NBG http://t.co/svSp570ksH
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$IYR Percent Change Updated Friday, February 27, 2015 4:59:22 PM $GG $IBM $DNKN $SH http://t.co/GFXHp0lq8S
Mark Trader
27 Feb 15 14:41:23
I banked over 200% in gains during my 14-day trial with http://t.co/L2jCaE1M1d. Their 5 guru traders are amazing. $GG $FITX $BMY
ETF Investing
27 Feb 15 14:00:02
2 'Must Own' Gold Stocks For A Weak Economy http://t.co/G23BNCAWCN $AU $ETF $GG $GLD $KCG $ABX
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27 Feb 15 13:35:17
#TSX notable monthly gainers/losers: $RY $TD $BMO $CM $BNS $GG $AEM $EGO $KGC $SLW $TCK $FM.TO http://t.co/AioN7dJl0W
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$FCX News Updated Friday, February 27, 2015 4:03:23 PM $AMZN $DBA $GG $KMI http://t.co/0R9g7kmYPi
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27 Feb 15 12:41:14
$SPXL Stock Forum Updated Friday, February 27, 2015 3:07:25 PM $YINN $GG $SPXL $VTI http://t.co/HUeaxDRyxi
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$XLU Stock Price Updated Friday, February 27, 2015 3:07:25 PM $ABX $ECIG $GG $VZ http://t.co/L71As3tIGJ
Samantha LaDuc
27 Feb 15 12:15:59
And some gold miner plays want to BO if given half a chance: $NUGT $ABX $AU $SBGL $GG $ANV. Ideal scenario: $GLD gaps>$118 Monday.
Market Realist
27 Feb 15 12:00:23
Newmont beat expectations in 2014 – will focus on development $ABX $GDX $GG $GLD http://t.co/yQ28GzWgeU
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$TNA Opinions Updated Friday, February 27, 2015 2:03:24 PM $INTC $GG $BABA $SLW http://t.co/6QE3oHZHel
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27 Feb 15 11:24:57
"@chessNwine: NEW POST: Close to Solving the Mystery http://t.co/pp8qMN0oDA $ABX $GDX $GG $NEM $NUGT"
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27 Feb 15 11:21:22
danrocks: $GG Goldcorp Inc.: GG Stock is number 196 for the largest percentage http://t.co/lt1QDeR8qs
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27 Feb 15 11:18:59
Right now GG is number 196 for the largest percentage gain out of 250 stocks. $GG GG is up +1.96% in the last http://t.co/PLhUbB9ou8
danrocks
27 Feb 15 11:18:37
$GG GG Stock is number 196 for the largest percentage gain out of 250 stocks. $GG GG is up +1.96% in the last 5 da http://t.co/E8c9vt7kpE
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27 Feb 15 11:15:35
http://t.co/Fv2ZjhWhEH <- Want to make $600,00 In One Year Trading? Check out how this guy did it! $AAVL $GG $TGT
My3Sons
27 Feb 15 11:13:16
RT @chessNwine: NEW POST: Close to Solving the Mystery http://t.co/JYGw0x3Vfx $ABX $GDX $GG $NEM $NUGT
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27 Feb 15 11:10:04
NEW POST: Close to Solving the Mystery http://t.co/JYGw0x3Vfx $ABX $GDX $GG $NEM $NUGT
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$FCX News Updated Friday, February 27, 2015 12:59:22 PM $JNK $PAL $CMG $GG http://t.co/ImylhNvdL4
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$GG Filings Updated Friday, February 27, 2015 1:11:27 PM $FSLR $AMZN $PCLN $FXI http://t.co/gYFYZB9jcT
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27 Feb 15 09:38:10
$CMG Recent News Updated Friday, February 27, 2015 12:07:30 PM $NEM $GG $MRK $TWTR http://t.co/BAo5JTu7wy
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27 Feb 15 09:36:51
Volume Alert - GG 22.15 Goldcorp Inc $GG Hit a high today of 22.22 Closing the day 10:30 at 22.15 +0.41 +1.89% http://t.co/I73dzqaEC6
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leahanne
27 Feb 15 09:36:30
$GG Volume Alert - GG Stock 22.15 Goldcorp Inc $GG Hit a high today of 22.22 Closing the day 10:30 at 22.15 +0.41 http://t.co/wO7p86fUwD
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$DRYS Stock Price Updated Friday, February 27, 2015 12:11:33 PM $AMGN $SPXL $MCD $GG http://t.co/ECzWi5dzXL
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27 Feb 15 08:30:10
RT @TNR_Gold: Kirill Klip.: Goldcorp put its new mine into production in Argentina this month http://t.co/iRAN5yY5t7 $GG $MUX $TRRXF
Kirill Klip
27 Feb 15 08:24:52
RT @TNR_Gold: Kirill Klip.: Yamana is moving forward with Cerro Morro mine in Argentina http://t.co/7L4whzlWZA $MUX 4TRRXF $AUY $GG $GDX $…
Kirill Klip
27 Feb 15 08:24:48
RT @TNR_Gold: Kirill Klip.: Goldcorp put its new mine into production in Argentina this month http://t.co/iRAN5yY5t7 $GG $MUX $TRRXF
Kirill Klip
27 Feb 15 08:11:35
RT @TNR_Gold: Kirill Klip.: Rob McEwen: Los Azules Copper - ‘The Glimmer of Hope for Argentina.’ http://t.co/782QazBgni $MUX $TRRXF $GG $GD…
Nick Vitani
27 Feb 15 07:52:32
@dawnr48 -good idea. I went ahead and took $NUGT at $15.90. Need to get outta town :) still holding $GG stop at $22.00
Sufiy
27 Feb 15 07:32:39
RT @TNR_Gold: Kirill Klip.: Rob McEwen: Los Azules Copper - ‘The Glimmer of Hope for Argentina.’ http://t.co/782QazBgni $MUX $TRRXF $GG $GD…
Sufiy
27 Feb 15 07:32:37
RT @TNR_Gold: Kirill Klip.: Yamana is moving forward with Cerro Morro mine in Argentina http://t.co/7L4whzlWZA $MUX 4TRRXF $AUY $GG $GDX $…
Sufiy
27 Feb 15 07:32:35
RT @TNR_Gold: Kirill Klip.: Goldcorp put its new mine into production in Argentina this month http://t.co/iRAN5yY5t7 $GG $MUX $TRRXF
ETF Investing
27 Feb 15 07:30:03
Why The Gold Rebound Should Continue http://t.co/umICi1y3QL $AU $ETF $GDXJ $GFI $GG $GLD $HMY $KGC $NEM $IAU $SGOL
Stoxline Investing
27 Feb 15 07:29:54
$GG TA seems to have put it in a nice base. Six months target: 27.17. http://t.co/tgOQxZBmKg
InternationalLithium
27 Feb 15 07:14:17
RT @kirillklip: Kirill Klip.: Goldcorp put its new mine into production in Argentina this month http://t.co/o3U9tHEsw3 $GG $MUX $TRRXF
InternationalLithium
27 Feb 15 07:14:14
RT @kirillklip: Kirill Klip.: Yamana is moving forward with Cerro Morro mine in Argentina http://t.co/rMuCc1xp5W $MUX 4TRRXF $AUY $GG $GDX…
InternationalLithium
27 Feb 15 07:14:10
RT @kirillklip: Kirill Klip.: Rob McEwen: Los Azules Copper - 'The Glimmer of Hope for Argentina.' http://t.co/Oe67aNpzKd $MUX $TRRXF $GG $…
TNR Gold Corp
27 Feb 15 07:09:03
Kirill Klip.: Goldcorp put its new mine into production in Argentina this month http://t.co/iRAN5yY5t7 $GG $MUX $TRRXF
TNR Gold Corp
27 Feb 15 07:08:53
Kirill Klip.: Yamana is moving forward with Cerro Morro mine in Argentina http://t.co/7L4whzlWZA $MUX 4TRRXF $AUY $GG $GDX $GDXJ
TNR Gold Corp
27 Feb 15 07:08:43
Kirill Klip.: Rob McEwen: Los Azules Copper - ‘The Glimmer of Hope for Argentina.’ http://t.co/782QazBgni $MUX $TRRXF $GG $GDX $GDXJ
Sufiy
27 Feb 15 07:03:05
RT @kirillklip: Kirill Klip.: Goldcorp put its new mine into production in Argentina this month http://t.co/o3U9tHEsw3 $GG $MUX $TRRXF
				
				
By  +Follow June 12, 2014 1:53PM
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