Tags: gold | mining | investors | prices

FT's Authers: Gold Mining Shares 'Look Like Value Traps'

By    |   Friday, 06 December 2013 08:00 AM

As gold prices have slid from record highs over the past two years, gold mining stocks have dropped even faster.

So does that make the miners a good investment play now? No, says John Authers of the Financial Times.

"After such spectacular falls, and even backed by gold itself, gold mines look like value traps for now."

Editor's Note:
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Spot gold, which traded at $1,224 an ounce Thursday morning, has lost 36 percent from its September 2011 peak of $1,921.

The price has dropped in recent weeks, hitting a five-month low Wednesday, amid anticipation the Federal Reserve will taper its quantitative easing, perhaps beginning in March.

As for the miners, Barrick Gold, the world's biggest producer, has plunged 72 percent from its 2011 peak, and Newmont Mining has plummeted 68 percent.

"What was the problem?" Authers asks.

"Frank Holmes, US Global Investors' chief investment officer . . . suggests that companies levered up to fund new investment on the assumption that gold would keep rising," he writes.

"They badly misplayed their political hand, provoking various African governments to levy extra taxes on them. And in the post-crisis environment, when investors were hunting for yield above all else, many failed to pay a generous dividend."

UBS analysts say gold could fall to $1,050 next year.

The "struggle for gold not only rests with the predominant selling interest among investors currently, but with limited positive catalysts looking forward, gold is unlikely to regain its former appeal," they write in a commentary obtained by MarketWatch.

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

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As gold prices have slid from record highs over the past two years, gold mining stocks have dropped even faster.
gold,mining,investors,prices
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2013-00-06
Friday, 06 December 2013 08:00 AM
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