Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Image: Goldcorp
A week ago it looked as if gold’s 2017 rally was fizzling out and in danger of losing sight of the psychologically important $1,200 an ounce level. A number of major gold stocks which had outperformed the metal and then some since the beginning of the year, fell back into the red for 2017.
Then the Federal Reserve acted on a telegraphed interest rate hike and accompanied the upward adjustment, only the third such move in a decade, with surprisingly dovish comments. Rate hike expectations for the rest of the year were dialled down despite signs that inflation could soon creep above the central bank’s targeted rate. The dollar fell and so did yields on US government bonds, exactly what the gold price needed.
Canadian producers are honing in on double digit post-Fed gains
This week Wednesday April gold futures contracts on the Comex market in New York touched a high of $1,251.50 at the open, up more than $50 from levels just before the Fed announcement. That sparked a huge rally in the shares of the world’s top producers.
Those counters that received a double benefit from a rising gold price and strengthening domestic currencies against the US dollar enjoyed the most gains. New York-listed equities of South Africa’s Sibanye Gold and Gold Fields are showing gains of over 15% or more while Canadian producers are honing in on double digit post-Fed gains should the metal’s run continue.
Russia’s Polyus Gold is the worst performer and world number two producer Newmont has to settle for an 4.4% advance, but at least the Denver-based miner is no longer down year-to-date.
