Gold Stocks (GDX) Steady, $2,000 Platinum Ahead?

GOLD STOCKS NEWS – Gold stocks stabilized Monday morning as the Market Vectors Gold Miners ETF (GDX) inched higher by 0.2% to $56.53 per share.  The modest strength in gold stocks and the GDX came in spite of a fractional decline in the spot price of gold, which dipped 0.3% to $1,720.43 per ounce.  The S&P/TSX Global Gold Index, Canada’s leading gold stocks composite, advanced 0.3% alongside the GDX.

With today’s advance in gold stocks, the GDX extended its year-to-date gain to 10.0%.  However, over the past 52 weeks the gold stocks ETF is up just 0.7% – considerably behind the 27.3% climb in the yellow metal.  The large majority of gold stocks have failed to provide investors with the gold price leverage exhibited during prior bull markets in gold.

As a result of the sector’s underperformance and rebound in global economic activity in recent months, investors have begun to seek out other commodity-related names.  One of the best performing commodities thus far in 2012 has been platinum, which has surged over 19% to $1,620 per ounce.  Platinum has benefited significantly from its dual role as a precious and industrial metal.  Rampant currency debasement across the globe has combined with improving economic fundamentals to propel platinum higher this year.

Commenting on the outlook for platinum, Bart Melek – Head of Commodity Strategy at TD Securities – wrote in recent note to clients that “Better demand prospects along with a more stable global financial system have been key factors responsible for the platinum rally, with the supply side playing an increasingly important supporting role.”

Melek also noted, “The improved macro picture is likely to continue to lift fabrication demand expectations, while ongoing supply concerns ranging from power and labour issues in South Africa to resource nationalism in other parts of PGMs producing Africa will keep output growth subdued.”  In light of his bullish outlook for the metal, Melek forecasted that platinum will “trade north of $2,000 sometime in 2013.”

In contrast to the gold stocks sector, there exists only a small set of publicly-traded platinum companies by which investors can gain exposure to platinum in the equity markets.  One member of the sector, however, is Platinum Group Metals (PTM.TSX, AMEX: PLG) – which has generated increased attention after legendary investor George Soros purchased a noteworthy position in the Company last year.

Over the past year, Platinum Group Metals has made substantial progress at its Western Bushveld Joint Venture (WBJV) Project 1 Platinum Mine, in which it holds a 74% interest.  WBJV is located in South Africa near a belt that comprises approximately 70% of the world’s current platinum production.

This morning, the Company reported high grade drill results at the Waterberg project on the North Limb of the Bushveld Complex.  The Company holds a 49.97% interest in Waterberg and Japanese state company JOGMEC is earning a 37% interest.  Highlights of the results included the intersection of 4.77 grams per tonne (g/t) of platinum, palladium, and gold over 4.75 meters (m) for the T2 reef in hole WB005.

Platinum Group Metals also noted that drilling through the Waterberg sediments by the Joint Venture discovered a previously unrecognized portion of the Bushveld Complex North of the North Limb.  Going forward, the Company intends to propose to its Joint Venture Partners that the exploration program be expanded from five to ten drill rigs. Furthermore, a budget will be announced when agreed upon by the Joint Venture.

In Monday morning trading, notable advancers in the gold stocks sector included GDX components Agnico-Eagle Mines (AEM), Barrick Gold (ABX), and Gold Fields (GFI).  AEM rose by 0.2% to $36.48, ABX by 0.2% to $49.19, and GFI by 0.7% to $16.62 per share.