Investors Favour Mines' Shares over Physical Gold
Investors Favour Mines' Shares over Physical Gold
BYLINE: Debarati Roy
INVESTORS seeking a hedge against a waning US economic recovery and escalating conflict in Ukraine have made twice as much money buying gold-mining shares rather than the metal.
The Market Vectors Gold Miners exchange-traded fund (ETF) has climbed 27 percent this year, more than double the 13 percent advance for the SPDR Gold Trust, the biggest exchange-traded product backed by bullion.
This is the first quarter the company fund is outperforming the metal ETF since 2012. Assets in the fund tracking the producers have expanded 6 percent in the past four weeks, compared with a 2.7 percent gain for the gold trust, data show.
Investors are returning to the shares after companies in the benchmark Philadelphia gold & silver index traded at the cheapest ever relative to the price of bullion in December last year.
Last year's 28 percent plunge for the precious metal, the biggest since 1981, forced producers
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including Barrick Gold and Goldcorp to cut spending and sell assets. The nine largest mining firms will generate free cash flow in 2014 for the first time in three years, analysts estimate.
"Miners got caught in the crush," said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati. "Some of them lowered production and sold off mines and announced write-downs. They fell to a level that bore no resemblance to the underlying economic value, and started to look so attractive."
The Philadelphia gold & silver index, which tracks 30 companies, has gained 22 percent this year, while gold futures in New York have risen 13 percent.
The Standard & Poor's GSCI spot index of 24 raw materials has advanced 0.8 percent, and the MSCI all-country world index of equities has dropped 0.9 percent.
A rally for US equities and muted inflation prompted some investors to give up on gold last year, sending prices to the first annual decline since 2000
INVESTORS seeking a hedge against a waning US economic recovery and escalating conflict in Ukraine have made twice as much money buying gold-mining shares rather than the metal.
The Market Vectors Gold Miners exchange-traded fund (ETF) has climbed 27 percent this year, more than double the 13 percent advance for the SPDR Gold Trust, the biggest exchange-traded product backed by bullion.
This is the first quarter the company fund is outperforming the metal ETF since 2012. Assets in the fund tracking the producers have expanded 6 percent in the past four weeks, compared with a 2.7 percent gain for the gold trust, data show.
Investors are returning to the shares after companies in the benchmark Philadelphia gold & silver index traded at the cheapest ever relative to the price of bullion in December last year.
Last year's 28 percent plunge for the precious metal, the biggest since 1981, forced producers
↚
including Barrick Gold and Goldcorp to cut spending and sell assets. The nine largest mining firms will generate free cash flow in 2014 for the first time in three years, analysts estimate.
"Miners got caught in the crush," said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati. "Some of them lowered production and sold off mines and announced write-downs. They fell to a level that bore no resemblance to the underlying economic value, and started to look so attractive."
The Philadelphia gold & silver index, which tracks 30 companies, has gained 22 percent this year, while gold futures in New York have risen 13 percent.
The Standard & Poor's GSCI spot index of 24 raw materials has advanced 0.8 percent, and the MSCI all-country world index of equities has dropped 0.9 percent.
A rally for US equities and muted inflation prompted some investors to give up on gold last year, sending prices to the first annual decline since 2000
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