Gold Stocks Retreat, GDX Dips 0.5%

GOLD STOCKS NEWS – Gold stocks retreated Monday morning as the Market Vectors Gold Miners ETF (GDX) slipped by 0.5% to $54.20 per share.  The modest weakness in gold stocks and the GDX coincided with a tepid movement in COMEX gold futures, which inched lower to $1,724.30 per ounce.  The S&P/TSX Global Gold Index, Canada’s leading basket of gold stocks, fell 0.7% to 371.69 alongside the GDX.

The gold stocks sector showed a muted reaction to this past weekend’s news that the Greek parliament approved a new set of austerity measures to ensure its next round of bailout money.  As for the broader equity markets, the S&P 500 Index opened substantially higher but later pared its gains.  In mid-morning trading, the benchmark index had risen 0.5% to 1,348.84.

After a strong start to 2012, gold stocks are now coming off of consecutive weekly declines for the first time in two months.  The GDX, which climbed 9.8% in January, is presently lower by 4.0% this month.  On a year-to-date basis, the GDX is now higher by 5.4%, below the S&P 500’s gain of 7.3% over the same time frame.

Gold stocks in the headlines on Monday included Barrick Gold (ABX), the world’s largest gold mining company.  According to a Reuters report, Barrick plans to sell its entire 20.4% stake in Highland Gold Mining Ltd, a gold production and exploration company in Russia.  The report noted that the Company has yet to decide on the exact timing or structure of the sale.

Barrick purchased the position in Highland nearly ten years ago with the goal of expanding into Russia.  However, the report noted that “as Highland failed to significantly ramp up its production and with Russia still a tough environment for foreign miners, Barrick Gold has focused on its more lucrative U.S. and Latin American growth assets.”

Highland Gold Mining is also 40% owned by Millhouse LLC, the private investment company of Russian billionaire Roman Abramovich.  Millhouse could purchase Barrick’s stake, according to VTB analyst Nikolay Sosnovskiy, and subsequently sell it to a third party at a later date.

“I’m not sure it is a good time…to sell, but it may be a good time (for Millhouse) to buy from Barrick, then change the situation and sell to another party going forward,” Sosnovskiy stated. “Maybe Barrick agrees to sell at a discount just to monetize this stake.”

In morning trading, ABX fell alongside the GDX, by $0.44, or 0.9%, to $47.71 per share.  Other notable gold stocks moving lower included GDX components Kinross Gold (ABX), Newmont Mining (NEM), and Yamana Gold (AUY).  KGC slid by 1.8% to $10.59, NEM by 0.7% to $59.23, and AUY by 0.4% to $16.23 per share.