Gold Reaches Record but Miners Struggle to Match Gains

Brittney Barrett  |

As expected, the uncertainty surrounding European and U.S. debt led gold to its new record high of over $1,600 an ounce today. Gold for August delivery shot up $14.20 or almost a full percent in morning trading reaching $1,604.20 an ounce on the Comex division of the New York Mercantile Exchange.  Gold has risen by over 7 percent in July.

Last week, gold futures closed at $1,590.10 an ounce. Investors have not expressed concern with the rising price of gold but rather have embraced it as a safe haven as the unresolved issue of the debt ceiling continues to loom on the future of the nation’s credit rating. Threats from Moody’s concerning a credit grade reduction have been rising in seriousness, leading investors to presume a potential weakening of the dollar. Investor efforts in self-protection from potentially weakened currency have eclipsed any concerns over the sky rocketing gold prices.

Naturally, the price of gold lifted the price of bullion backed exchange traded funds like SPDR Gold Fund (GLD) have been rising alongside futures, reaching its own 52-week high today.

Meanwhile, gold mining ETFs, like Market Vectors Gold Miners ETF (GDX) and Market Vector Junior Gold Miners ETF (DGXJ) have continued to climb alongside the fear of European debt contagion and U.S. debt ceiling worries, but their improvements have been more measured. The gap between junior gold miners from their 52-week highs remains significant in spite of the surge of gold buying.

Buenaventura (BVN) has regained around 8 percent of its share price in the earlier part of this month after plummeting over 30 percent from highs. Golden Star (GSS) is also edging back up but still remains close to 50 percent off its highs.

Larger, more well-known mining companies like Barrick Gold Corp, (ABX) and Goldcorp. Inc. (GG) have been pushing back toward their year-highs more quickly than other lesser known competitors. Today, Zachs reiterated Barrick Gold Corporation as a Strong Buy as Value.

NovaGold Resources (NG) experienced the largest percentage gain for the day in spite of remaining well off its 52-week high. Rubicon Minerals (RMX) also had a big day, but the small, Canadian mineral exploration company is still around 40 or more percent below its highs for the year.

Gold isn't the only metal advancing as a result of the debt anxiety, silver has also been recovering for its second quarter weakness. Silver for September delivery has been ticking higher for weeks, reaching it highest levels since early May during recent trading. While gold continues to out pace silver, it's the more obvious choice for a safe-haven during times of uncertainty, analysts suspect the gold/silver ratio will decline as the summer goes on. Silver is anticipated to shake off weakness from earlier in the year after it fell from teetering highs in the most recent quarter as an upswing has led to more optimism surrounding the metal. iShares Silver Trust (SLV) was higher for the day, but it was ProShares Ultra Silver (ACQ) that rose most impressively among ETFs.



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