Gold Shares Firm Despite Slide in Gold Futures

Shares of most gold producers and explorers held firm Monday despite a modest sell-off in the yellow metal.  The Market Vectors Gold Miners ETF (GDX) rose 0.3% to $53.52 per share in afternoon trading, while COMEX gold futures retreated $8.70, or 0.5%, to $1,608.10 per ounce.

The yellow metal had climbed above $1,620 in overnight trading, but a failure to surmount an attack on its 200-day moving average of $1,633 per ounce fueled profit taking among traders.

The move higher in gold shares came despite disappointing production results from two large-cap gold miners, Goldcorp (GG) and Eldorado Gold (EGO).  This morning Goldcorp reported fourth quarter 2011 production of 687,900 ounces and issued 2012 guidance of 2.6 million ounces.

J.P. Morgan analyst John Bridges wrote in a note to clients that “The 2012 production forecast has been cut to 2.6mn ozs (our estimate was 2.78mn ozs) primarily due to a bigger than expected impact from the floods at the new Pueblo Viejo mine in the Dominican Republic. Fourth quarter 2011 production was 687,900ozs, in line with our estimate of 690,769ozs.”

Eldorado Gold announced quarterly gold production of 168,933 ounces and issued a 2012 full-year forecast of 730,000-775,000 ounces.  In a commentary on the results, TD Securities analyst Steven Green noted that the 2012 guidance was below his 806,000 ounce estimate.  ”The short fall appears largely due to weaker expected production from Jinfeng with 2012 production guidance of 120,000 – 125,000 oz down more than 50,000 oz from 2011 production,” Green wrote.  ”With the open pit at Jinfeng currently undergoing a pit wall pushback, the production is currently all underground.  Obviously this is expected to persist longer than expected in 2012 resulting in lower production expectations.”

Despite the worse than expected forecasts, shares of GG climbed 1.6% to $44.70 and EGO held near unchanged at $14.39 in afternoon trading.