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Monday, June 14, 2010

Why Newmont (NYSE:NEM), Barrick (NYSE:ABX), Goldcorp (NYSE:GG) Lag Gold Prices

Off and on during the ongoing gold bull market, gold miners like Newmont (NYSE:NEM), Barrick (NYSE:ABX) and Goldcorp (NYSE:GG), for no apparent reason, lag behind the upward rise in gold prices.

Much of this is because of the push and pull between gold when it is used as an offensive financial tool and when it's used defensively.

When investors are focusing on the defensive side, which garners most the financial press, relating to inflation, safety, and preserving wealth, gold futures prices and bullion are what is focused on.

Gold miners are largely ignored at the outset of these times, something that creates that lag in share prices moving in step with gold prices in general.

A lot of investors are just getting to see the offensive side of gold miners as potential generators of capital gains, and so when gold prices move, especially upwards, they are still slow to respond to the positive side of the gold market at that time.

But changes by gold mining companies have made them better investments, and they're operating much closer to regular businesses than they have in the past.

I think that will change the way gold mining companies will be perceived in the future, and we'll see movements much closer to in line in gold prices than the legs we've been seeing at times when gold prices surge, but the gold miners don't.

1 comment:

Anonymous said...

As goldmines become exhausted , their shares will loose all value while the value bullion will skyrocket But we are not at this infliction point by a long measure. In the coming years mines will outperform bullion because a 50% increase in the gold price will DOUBLE the profitability of gokdmines like Barrick