Gold futures for Dec. 13 delivery were trading just a smidgen lower on Tuesday, but have dropped about 2.50 percent over the past week as prices continue to struggle to remain above $1,200 per ounce.
The price movement for futures has been toying savagely with gold mining stocks all year, and the day’s trading session provided another demonstration of this as the overwhelming majority of listed companies were trading lower.
The biggest stocks in the industry all took substantial losses, with Goldcorp. Inc (GG) off almost 2 percent, Barrick Gold (ABX) down 1 percent, and Newmont Mining (NEM) down nearly 3 percent. Smaller mining companies were significantly affected as well.
For all the hand-wringing that has been occasioned by this most unfortunate year for gold prices and gold stocks, however, veteran metals and mining investors are typically very good at seeing through the sort of reflexive bear market rhetoric driven mainly by commentators whose job it is to add extra layers of sensationalism to any drastic price action. Indeed, a bloodletting like the current one is expected to have the effect of making clear which miners are sitting on the fundamentals necessary to make it through this rough patch.
All the same, the industry is in a great deal of trouble as a result of the sharp drop-off in gold prices this year, and there is no denying it. Miners are being forced into undertaking drastic cost-cutting measures as a result of the 2013 downturn, and have been forced to shutter or scale back their more costly operations, and the worst may be yet to come.
The situation is so bad that there is only one gold stock that can claim positive returns on a year-to-date basis. Kingold Jewlery Inc. (KGJI) , the Chinese jewelry retailer, is the only equity gold play to have performed positively on the year, having added some 61 percent to reach its current price of a whopping $1.82 per share.
Comparing the performance of Kingold in 2013 to that of proper mining plays would seem like comparing the proverbial apple to the proverbial orange. But this state of affairs actually highlights one of the structural elements that would seem to undermine the whole narrative about the downfall of gold. While much has been made of declining gold futures, the performance of Kingold suggests that actual physical demand is not suffering too badly, especially in countries where the whole notion of gold as a safe haven is a far more concrete one, both in theory and in practice.
Kingold was trading about 2.50 percent lower ahead of the closing bell, but the company's performance in 2013 should be taken as an indication of where yellow metal's real value will be found in the future.
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