Gold Stocks (GDX) Firm, Platinum to Rise?

GOLD STOCKS NEWS – Gold stocks held firm Wednesday as the Market Vectors Gold Miners ETF (GDX) rose $0.43, or 0.7%, to $62.93 per share.  In Canada, gold stocks inched higher as well, with the S&P/TSX Global Gold Index rising 0.5%.  The stability in gold stocks and the GDX came despite broad-based liquidation as European sovereign debt concerns continued to dominate the financial landscape.  The widespread selling kept a lid on COMEX gold futures, which dipped 0.2% to $1,795.20 per ounce.

Despite today’s modest gain in gold stocks, the GDX is higher by just 2.1% on a year-to-date basis – compared to a 26.3% surge for the price of gold.  Although the yellow metal is on pace for its 11th consecutive annual gain, the gold stocks sector has not provided investors with the gold price leverage displayed in prior gold bull markets.

As gold stocks have continued to underperform, other areas of the precious metals space have generated increased attention.  Platinum, which provides a hedge against fiat currency debasement and benefits from global economic growth through its industrial uses, has been the recent subject of bullish commentary by several market strategists and investors.

The price of platinum has come under considerable pressure in recent months as the sovereign debt crisis in Europe has rocked financial markets.  At its current level of $1,640.80 per ounce, it is trading well below the price of gold – a relatively rare occurrence indicative of elevated risk aversion across the globe.

TD Securities’ Global Precious Metals team commented on this development in a report to clients, contending that the markets may have now priced in the risks of a significant economic slowdown.  The firm noted that with the platinum/gold ratio falling below 1.0, it is trading at 25-year lows.  Platinum has “participated in the rout for industrial metals,” TD added, and “It feels like the market is fully discounting the precious metal attributes.”

While there are a number of publicly-traded gold stocks, only a small collection of public companies concentrating on the production of platinum exist.  One emerging company in this sector is Platinum Group Metals (PTM.TSX, PLG: AMEX), which started to receive considerable attention after legendary investor George Soros accumulated a sizeable position.

Platinum Group Metals holds a 74% interest in the Western Bushveld Joint Venture (WBJV) in South Africa, which is located next to a belt that comprises 70% of the world’s current platinum production.  Since October 2008, the company has provided investors with substantial leverage to the platinum price, having climbed 126.7%.

The Company has made significant progress at WBJV in 2011 and this morning announced a new discovery at its flagship property.  Platinum Group Metals reported high grade drill intercepts in an area north of the previously mapped North Limb of the Bushveld Complex.  Highlights of the results included the intersection of 3.47 grams per tonne (g/t) Platinum, Palladium and Gold (2 PGE+Au) over 3.5 meters at the T1 Reef.

Platinum Group Metals first discovered this Northern extension of the Bushveld Complex in early 2011 under cover rocks by drilling based on detailed geophysical and geochemical work.  The Company noted that drilling is continuing and the drill program is being expanded upon immediately.  The intercepts are located on the 137 square kilometer Waterberg Property and the new zone has a projected, potential strike length distance of 7 kilometers.

In Wednesday morning trading, notable gold stocks moving lower included GDX components AngloGold Ashanti (AU), Yamana Gold (AUY), and Newmont Mining (NEM).  AU, AUY, and NEM retreated 1.4%, 1.0%, and 0.8%, respectively.