GOLD STOCKS NEWS – Gold stocks rallied Tuesday, as the Market Vectors Gold Miners ETF (GDX) rose to a new all-time record high alongside the yellow metal. The GDX climbed 2.1% to $66.29 per share while gold futures reached $1,923.70 per ounce before paring their gains. Strength in gold stocks and the GDX was fueled by a further rise in risk aversion on Wall Street, stemming from recession concerns in the U.S. and euro zone. The S&P/TSX Global Gold Index, Canada’s leading composite of gold stocks, climbed 2.5% to 445.33 alongside the GDX.
With today’s rally in gold stocks, the GDX extended its year-to-date gain to 7.5%. However, the gold stocks ETF continues to lag the price of gold – which has climbed 35.3% in 2011. Given the GDX’s underperformance, several investors have recently predicted that gold stocks will soon begin to play catch up to the yellow metal.
In yesterday’s Financial Times, long-time investor Jim Slater presented his bullish case for gold stocks. In an article entitled Gold miners will soon feel the bullion effect, Slater contended that “the arguments for buying gold have never been stronger. Gold is increasingly accepted as a currency and haven. Unlike other currencies, gold has no debt. Central banks have switched from being net sellers to large buyers.”
With regard to the underperformance of gold stocks, Slater wrote that “The disconnect between the rising gold price and falling gold shares continues to surprise me. I do not buy the argument that gold shares are just shares and stock markets are falling at the moment. The recent rise in the gold price will produce a massive boost to gold mining profits. When it is ready the market will recognise this.”
Slater went on to say that “Compare gold mining stocks today with quoted companies dependent on increased consumer spending. Gold mining companies are benefiting from the tailwind of the gold price that is massively increasing their revenue and future cash flow. In contrast, companies that rely on consumer spending are likely to run into a very strong headwind. I know where I would rather have my money.”
In this past weekend’s Barron’s, Alan Newman – who writes the contrarian Crosscurrents letter – also discussed his positive stance on gold stocks. Newman argued that gold stocks “have not even remotely hopped on board the same train bullion did and are still lagging far behind.” Looking forward, he predicted that “there will be a fantastic speculative phase” in which gold stocks “go totally berserk.”
Notable gold stocks moving higher in concert with the GDX this morning included Yamana Gold (AUY), Goldcorp (GG), and Randgold Resources (GOLD). AUY, GG, and GOLD surged 2.7%, 3.8%, and 3.2%, respectively.
Claude Resources Hits High Grade Gold at Seabee
Claude is now planning to drill an additional 20,000m this year at its Seabee Gold Operation, bringing year end drilling to approximately 100,000m. Exploration targets include the Seabee Gold Mine, the Santoy 8 Gold Mine, Santoy Gap, L62 Zone and Neptune. Full Claude Resources Press Release.
