Tags: MarketWatch | Gold | Mining | Stocks

MarketWatch: Don't Catch the Falling Knife of Gold Mining Stocks

By    |   Sunday, 08 Dec 2013 06:16 PM

The biggest gold mining stocks have endured an epic meltdown this year because of plummeting gold prices, but tax-loss selling may spur even deeper losses, MarketWatch reported.

The major mining stocks have lost about half their value, with the benchmark ETF, the MarketVector Gold Miners (GDX), off 55 percent this year.

“Gold stocks have actually been underperforming gold since the 2008 credit crisis,” said Brian Lundin, editor of Gold Newsletter.

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Meanwhile, the broad U.S. stock market has gained sharply in 2013, with the S&P 500 up about 25 percent.

“With markets near all-time highs, some investors are balancing portfolios and realizing significant capital gains,” said Malcolm Gissen, co-manager of the Encompass Fund.

And “what in their portfolios have declined to offset the gains? Gold stocks,” Gissen said. “The miners are suffering largely because of tax-loss selling. Despite the big losses, analysts MarketWatch talked to did not predict that gold mining stocks have hit bottom.

Jeffrey Wright, managing director at H.C. Wainwright LLC, said he believes the gold miners that survive will be the ones who can tighten their belts and maintain sold balance sheets.

The winners “have been or are in the process of adjusting by reining in labor, materials and exploration expenses while either increasing production or meeting guidance targets,” he said.

According to the Financial Times, gold mining stocks “look like value traps.”

“What are the chances of a rebound? Goldbugs would be proved right if central bank policies provoke inflation,” the Times wrote in an analysis of the dreary state of gold mining stocks.

“But broadly, for those who do not buy the arguments of the gold bugs about the dangers to the fiat money system, the case for making a big bet on gold is not there. True fiat money skeptics will already have big positions.”

The Wall Street Journal reported that at least one blue-chip gold miner, Barrick Gold Corp., is taking a look at hedging its gold positions, a practice many of the gold miners unwound during the long ascent of gold prices, but which may start making sense again in the industry’s current weak state.

Gold was trading at about $1,232 per ounce Friday, down about 25 percent for the year.

Editor's Note: Get Tom Luongo's Gold Stock Adviser — Click Here Now!

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The biggest gold mining stocks have endured an epic meltdown this year because of plummeting gold prices, but tax-loss selling may spur even deeper losses, MarketWatch reported.
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2013-16-08
Sunday, 08 Dec 2013 06:16 PM
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