Gold and Silver Outperform Mining Counterparts

Brittney Barrett  |

Tensions are high on Wall Street as the threat of a U.S. debt default continues to loom. Concern that the lack of resolution could result in a credit rating reduction from Moody’s and the S&P that would paralyze the market had led investors toward safe havens.

Traditionally viewed as a stable place for investors to reside during weak economic periods, gold has been among the premier gainers amid the rising nerves and fast approaching deadlines. In the event of a potential default, investors seem as much concerned with protecting their assets as with generating returns.

Perhaps this is the reason for the increasingly pronounced trend of heavy buying of gold, like in the SPDR Gold Shares (GLD) while mining shares remain more in line with the S&P.

Currently the gold index is up only 3 percent while gold itself is higher by 8.5 percent. The metal reached its all time high today, far surpassing $1600 after adding $15. Gold for December delivery closed at $1,631.20 an ounce on the Comex division of the New York Mercantile Exchange after reaching as high as $1,637.50 in intraday trading.

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For the week gold tacked on1.9 percent. Among stocks in the metals sector today, Newmont Mining Corp. (NEM) reported earnings that fell beneath expectations. Revenue for the company was short on predictions, equaling $2.4 billion on Wall Street forecasts of $2.5 billion. The production of gold sunk 5.4 percent with copper production lower by 45 percent. Newmont cited lower-grade ores as the culprit for losses. Newmont reported the average price for gold at $1,501 an ounce, mirroring the report yesterday from Barrick Gold Corp. (ABX) and Goldcorp Inc. (GG). Shares sunk on the news in spite of Newmont’s CEO saying that he anticipated gold to reach $1,750 an ounce in 2012 and raising its dividends from 20 to 30 cents a share.

The guidance did not help shares in trading today. Newmont was not alone; however, there was considerably more volume among gold ETFs than stocks for the day. SPDR Gold Trust (GLD) shined the brightest among gold investments; reaching a fresh 52-week high of $159.25. Confirming the trend of gold out performing miners, the iShares Gold Trust (IAU) climbed to its own 52-week high today.Meanwhile, the Market Vectors Gold Miners ETF (GDX) continued to suffer losses and hover midway between annual highs and lows.  The Market Vectors Junior Gold Miners ETF (GDXJ) was also slightly lower for the day.

Elsewhere in metals, assertions that silver could soon catch up to gold were deflated today after a lackluster performance. The iShares Silver Trust (SLV) and PowerShares DB Silver Fund ( DBS)  both ticked only slightly higher.

Silver miners also proved no more popular than their gold counterparts, Silver miner, Silver Wheaton Corp. (SLW) sunk  slightly alongside Pan American Silver Corp. (PAAS)  and Global X Silver Miners ETF ( SIL).

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