Who Had the Best Returns So Far for Gold's Big Spike in 2016?

Henry Truc  |

Since bottoming around $1050 in mid-December, the price of gold has surged as high as 20%, culminating in last week’s peak of $1250. The precious metal experienced a similar spike this time last year, but resumed its downtrend shortly thereafter. Considering that during the two-month run-up, many market strategists and experts were skeptical that gold could maintain these levels for much longer.

The dramatic move in gold was largely attributed to the continued global stimulus efforts and the early market turbulence that sent investors scurrying out of stocks and in desperate search for a place to hide. While a good portion of the market anxiety has since subsided—though not completely disappeared—this game of chicken will see investors continue to dance between the line of risk and safety. As a result, price movements for both stocks and perceived safe haven assets will continue to experience more volatility than investors have grown accustomed to in recent years.

But for a group that has largely languished this badly for such an extended period, these signs of life offer a glimmer of hope that the pain could finally be coming to an end.

Tracking Stocks in the Gold Sector

For the most part, the SPDR Gold Shares (GLD) does a pretty good job tracking the price of gold, jumping from $100.50 to $119.06 during gold’s two-month rise, and has subsequently cooled down as well. Year-to-date, the GLD is up about 13.8%.

But what about the performance of the stocks most affected by gold? How did they react to the price spike? Well, the Market Vectors Gold Miners ETF (GDX), which tracks gold mining stocks and not just gold itself, actually had a much more pronounced move higher. Year-to-date, the GDX is up just under 30%. This is a sector ravaged by a multi-year bear market, so any hint of a reversal typically draws the bulls back in, lest they miss out on yet another possible major buying opportunity.

So one would think that if you applied the same logic to the junior miners, you’d potentially find even greater outperformance when gold gets a significant uptick. Yet, oddly enough, the Market Vectors Junior Gold Miners ETF (GDXJ) is only up 23.7% on the year. While that’s certainly nothing to scoff at, especially when we’re really just talking about a month and a half’s worth of time here, it’s noticeably lower than that of the GDX. Perhaps the junior miners may just be too far out on the risk curve for the speculators, though at this point, pretty much everyone’s a junior in this space.

Looking at the top 10 performers during gold’s sharp rise in 2016, six of the companies are Canadian and the other four are in South Africa. From a size standpoint, only Barrick Gold (ABX) (ABX:CA) would be considered a true large cap.

Company Name Ticker Country Market Cap YTD Current Price
Harmony Gold Mining Company Limited HMY South Africa 1.14B 177.4% 2.58
DRDGOLD Ltd. DRD South Africa 144.00M 113.1% 3.41
Minco Gold Corporation MGH Canada 13.83M 99.9% 0.28
Sibanye Gold Limited SBGL South Africa 2.67B 93.6% 11.79
Golden Star Resources, Ltd. GSS Canada 195.41M 67.9% 0.29
Barrick Gold Corporation ABX/ABX:CA Canada 13.84B 61.1% 11.89
IAMGOLD Corp. IAG/IAG:CA Canada 893.14M 60.6% 2.28
Timmins Gold Corp. TGD Canada 67.47M 55.1% 0.21
Kinross Gold Corporation KGC Canada 3.23B 54.4% 2.81
Gold Fields Ltd. GFI South Africa 3.17B 53.1% 4.24

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