In times of market turmoil, investors often embrace gold. And when that happens, gold-mining stocks tend to do even better.

This slideshow requires JavaScript.


♦♦♦ Stock Market News Today ♦♦♦



In times of market turmoil, investors often embrace gold. And when that happens, gold-mining stocks tend to do even better. That has certainly been the case so far this month. New York gold futures are up 2.7% so far in October versus a 3.6% decline for the S&P 500. Shares of many of the world’s biggest gold miners, meanwhile, have notched double-digit gains.

Companies like Toronto’s Barrick Gold Corp ABX +3.42% , South Africa’s AngloGold Ashanti AU +3.66% and Acacia Mining are all up around 15% to 18% after a bruising summer. The VanEck Vectors Gold Miners exchange-traded fund and the iShares MSCI Global Gold Miners fund—which track indexes of global gold-mining firms—are up around 8% to 9% this month.

Gold-miner stocks allow investors to double down on bets the gold price will rise. These companies have higher fixed-investment costs and can become much more profitable when gold prices climb. Many of these companies pay out hefty dividends, too.

This slideshow requires JavaScript.

Hopes for further consolidation are adding to the momentum after Barrick Gold in September agreed to buy Randgold Resources Ltd. for $6 billion. Gold miners’ rapid ascent during the selloff marks a turnaround from other recent episodes of market turbulence. While gold and related assets have historically been used as a safe place to invest during times of economic or political stress, they found few fans during a selloff at the start of the year or during the summer turmoil in emerging markets.

Because concerns at the time largely centered around the prospect of rising U.S. interest rates, investors sought shelter in the U.S. dollar instead, in turn making gold less attractive to overseas buyers. The ICE Dollar Index rose about 9% between February and the middle of August, while New York gold futures fell about 12% and the VanEck gold miner fund fell about 20%. Rising rates also make assets like gold less attractive, because they don’t offer a yield. And both gold and miners haven’t fared so well in recent years. From highs in 2011, prices of the metal and the VanEck ETF are down around 35% and 70%, respectively. Meanwhile, the iShares fund has also tumbled 70% since its inception in 2012.

This time is different. The ICE Dollar Index has barely budged during this month’s selloff, the Federal Reserve’s plans for interest rates are well telegraphed and investors have turned skeptical that the dollar has much further room to rise.

“Given the strength of the U.S. dollar we’ve seen and slight concern now about the fiscal position in the U.S. following stimulus measures and tax reform, there’s some concerns around the U.S. dollar as an ultimate safe haven,” said Roger Jones, head of equities at London & Capital.

The U.S. government ran its largest budget deficit in six years during the fiscal year that ended last month, totaling $779 billion.

Meanwhile, “this [selloff] is more about a growth scare than February-March, when it was more about a rate hike scare,” Mr. Jones said. “If there’s another slowdown in growth, goldmining stocks will be at the forefront of investors’ minds.”

Advertisements


Categories: Commodities, Stock Markets

Tags: , ,

15 replies

  1. Looks like gold is on an uptrend, which is a good news.

    Liked by 1 person

Trackbacks

  1. Another two to three interest rate increases from the Federal Reserve will likely put U.S. borrowing costs in “neutral” territory. – Stock Market News Today
  2. The Chinese economy slowed to a growth rate of 6.5% in the third quarter, a bit lower than expected and the weakest pace of growth since the global meltdown year of 2009. – Stock Market News Today
  3. US make it into the ranking of countries with the highest levels of government debt. – Stock Market News Today
  4. U.S. oil inventories climbed 6.5 million barrels last week, almost triple the amount analysts had forecast, the U.S. Energy Information Administration said on Wednesday. – Stock Market News Today
  5. Asia Stock Market erased gains made in rally of the previous two sessions, which were led by China stimulus hopes – Stock Market News Today
  6. Yes Bank Ltd.’s profit missed estimates in the July-September quarter on higher provisions. – Stock Market News Today
  7. Stock Market News – Top 5 Penny Stocks to Buy In November. – Stock Market News Today
  8. Stock Market News – US technology stocks suffered renewed losses with the Nasdaq Composite index falling back into correction territory – Stock Market News Today
  9. The failure of so many investment strategies is viewed by some as a warning of what could come following years of above-average returns – Stock Market News Today
  10. Profit growth at China’s industrial firms cooled for a sixth straight month in October – Stock Market News Today
  11. U.S. equity funds saw $3.5 billion in outflows through Wednesday during a wild week on Wall Street – Stock Market News Today
  12. Credit Suisse to Buy Back up to $3 Billion in Shares, Swiss lender says it will raise its dividend 5% annually starting next year – Stock Market News Today
  13. China’s industrial profits suffer first drop in three years. Economists expect earnings to continue to worsen next year – Stock Market News Today
  14. Venezuela Has 20 Tons of Gold Ready to Ship. On Monday, a plane belonging to Nordwind Airlines, a company based in Moscow, landed at the international airport near Caracas – Stock Market News Today

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: