Tags: Gold | mining | shares | bullion

WSJ: Gold-Mining Shares Finally Start to Thrive

By    |   Wednesday, 29 August 2012 12:41 PM

Gold-mining stocks have begun to outperform gold bullion, after 12 months of lagging behind.

Low valuations and rising dividends are boosting the shares, according to The Wall Street Journal. Investors had shunned the stocks previously, flocking instead to exchange-traded funds (ETFs) that let them invest directly in the metal.

From Aug. 1 through Tuesday, the NYSE Gold Bugs Index, which includes 16 top mining companies, has appreciated 10 percent, compared with an increase of 3.5 percent for gold futures.

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For November through the end of July, the numbers were reversed, with the index plunging 28 percent, compared with a much milder 7 percent decline for gold bullion.

"A lot of professional investors are very attracted to gold stocks because they are so cheap," Matthew Peterson, a portfolio manager with Newgate Capital, tells The Journal.

Indeed, the current levels of gold of miner shares indicate gold bullion should trade below $1,400 an ounce, Jeffrey Wright, an analyst with Global Hunter Securities, tells the paper.

That compares with an actual price of $1,667 per ounce.

On the dividend front, some gold miners have almost doubled their dividends recently, making the shares attractive to income investors.

To be sure, miner stocks aren’t a slam dunk, Morningstar analyst Joung Park writes in a report.

“[R]ampant cost inflation and heightened competition for investor inflows by bullion bars and gold-backed ETFs remain key downside risks for gold-mining shares,” he says.

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Wednesday, 29 August 2012 12:41 PM
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