Gold Stocks (GDX) Dip, AU, IAG Climb

GOLD STOCKS NEWS – Gold stocks moved modestly lower Thursday afternoon as the Market Vectors Gold Miners ETF (GDX) dipped $0.25, or 0.4%, to $60.16 per share.  Today’s slight decline in gold stocks followed yesterday’s 7.0% surge in the GDX – its best day since November 3, 2009.

The sector moved substantially higher alongside the broader equity markets on Wednesday after several of the world’s leading central banks agreed to lower the cost of U.S. dollar funding to European banks.  It is often customary following such a large advance for stocks to give back a portion of the prior day’s gains; as such, it is a particularly positive sign for the GDX to be down just 0.4% this afternoon.

Thursday’s moderate weakness in gold stocks and the GDX was driven by a slight decline in COMEX gold futures, which fell $3.00 to $1,747.20 per ounce.  Gold stocks in Canada slid alongside the GDX, as the S&P/TSX Global Gold Index retreated 0.8% to 419.17.

Two gold stocks outperforming their peers today included GDX components AngloGold Ashanti (AU) and IAMGOLD (IAG).  Shares of AU climbed 0.8% to $48.36, while IAG rose 0.9% to $20.36 per share.  Each of these gold producers was the subject of bullish commentary this week.

Hedge fund magnate John Paulson reiterated his bullish stance on AngloGold Ashanti in Paulson & Co.’s third quarter investor letter, recently obtained by several news outlets.  The South African-based gold miner is “poised to rally given its continued robust performance resulting from ongoing financial and operational restructuring efforts as well as rising gold prices,” Paulson contended.

“Over the past year, AngloGold has eliminated its hedge book, improved its safety, and added to reserves outside South Africa,” Paulson added.  “The stock price has not yet responded to these initiatives even as AngloGold produced record results in the 2Q and is expected to eclipse those results in its 3Q.  We expect a significant valuation improvement from current levels.”

IAMGOLD was in the news today after Credit Suisse initiated coverage of the Canadian-based gold producer with an Outperform rating and $25.00 price target.  “CEO Stephen Letwin has spearheaded the company’s strategy toward transformation since taking the helm a year ago,” the firm wrote. “That strategy has been focused on three areas: (a) shedding non-core assets; (b) expanding cornerstone assets; and, (c) hunting for a suitable gold target to replace divested production with higher quality ounces.”

Credit Suisse went on to say that “Normally, pending M&A would be a signal for investors to shy away. In this case IAG has a $1.1B cash balance (and growing) which should be put to use. If successful, this three-pronged strategy will makeover IAG into a growth-oriented gold producer with a portfolio of high quality long life assets.”

In contrast to AU and IAG, notable gold stocks moving lower on Thursday included GDX components Barrick Gold (ABX), Goldcorp (GG) and Newmont Mining (NEM).  Shares of ABX fell by 0.7% to $52.50, GG by 0.8% to $53.24, and NEM by 0.5% to $68.51.