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Global Asset Manager Sees Increasing Value of Gold Mining Stocks

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Image Source: Brian Giesen, CC BY 2.0

According to the global asset manager, VanEck, gold mining stocks are currently trading at highly attractive valuations, signifying a possibility of the gold price gap to close.

The company’s report states that, while gold prices and stock performance tend to show relatively strong correlation, these two aspects diverged last month, with bullion jumping 3.1% and the MVIS Junior Gold Miners Index and the NYSE Arca Gold Miners Index declining 2.2% and 3.9%, respectively. VanEck gold strategist and portfolio manager Joe Foster commented:

“The markets reacted surprisingly strongly to a series of rather disappointing annual results. Although most producers have met expectations, there have been a few negative surprises that have weighed on their stocks. Additionally, a couple of miners downgraded the quality of their reserves or lowered production forecasts, and a couple of others raised equity.”

While miners made underwhelming announcements over the fourth quarter earnings season last year, Foster said that it does not reflect underperformance of gold stocks relative to bullion. With gold prices increasing (trading at above $1,200 per troy ounce), he even encouraged mining companies to increase their exploration spending.

Overall, the performance of gold mining stocks remains strong, with year-to-date performance of the MVIS Junior Gold Miners Index and the NYSE Arca Gold Miners Index standing at 17.3% and 10.7%, respectively.

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