Investors pile back into gold stocks

The bulls are back in town

The gold price jumped 1.6% or $20 an ounce on Friday to $1,249 an ounce, bringing its gains for the year to over 4%.

Gold’s advance came after a surprisingly weak US jobs report showing labour participation rates at levels last seen in 1978. The jobs shocker could force the Federal Reserve to keep interest rates near zero for longer than anticipated, hurting the dollar and boosting gold in return.

After a horrendous 2013 when gold mining stocks lost much more ground than the metal itself, 2014 so far is looking up.

And the rerating of gold stocks this year also comes in the face of ratings agency Moody’s decision this week to cut the gold and silver prices at which it assesses the majors to $1,100 and $18 an ounce, a move that could drive up borrowing costs for the industry.

By the close on Friday Barrick Gold Corp (TSX:ABX) had climbed 3% in heavy volume adding some $8 billion in market value since hitting 21-year lows in July last year. Barrick is now worth $23.1 billion on the TSX, up almost 6% since the start of the year.

The world’s number one producer was also lifted by news that its controversial $8.5 billion Pascua Lama mine may be getting a helping hand from Argentine authorities who want Chile to help revive the project straddling the countries’ borders.

Goldcorp (TSX:G) was the biggest gainer among the top producers, jumping 4% on the day. The Vancouver-based company which held the position as the world’s most valuable gold mining company for the better part of 2013 is up 9.8% this year.

Goldcorp, worth 20.5 billion on the TSX, said yesterday it expects to produce more than three million ounces of gold in 2014, a 13% increase compared to last year even as it drives down costs by 15% – 20% over the next two years.

Canada’s Kinross Gold (TSX:K), which is expected to produce around 2.6 million ounces of gold this year, jumped 2.3%. In terms of market worth, $5.6 billion Kinross has been overtaken by Yamana Gold despite the fact that Yamana produces almost 1m ounces fewer per year.

Investors have picking up Yamana (TSE:YRI) stock in droves betting that its low cost base and light debt load will see it weather current conditions better than its peers. Yamana ended 3.4% higher on Friday and is up over 8.3% in 2014. The Toronto-based company has a market value of $7.5 billion.

Agnico Eagle Mines (TSX:AEM) jumped more than 6%, Eldorado Gold Corp (TSX:ELD) climbed 4.6%, IAMGold Corp added 2.4% while NovaGold Resources (TSE:NG) rocketed 7.7%

Outside Canada, Denver-based Newmont Mining Corp (NYSE:NEM), the number two global gold producer in terms of annual output of around 5m ounces, added 2.6%, while the ADRs of AngloGold Ashanti (NYSE:AU) was one of Friday’s best performers, gaining 3.9%. However, The Johannesburg-based company has a long way to go to make up for last year’s 60% slump in market value as it embarks on an aggressive turnaround strategy.

Fellow South African miner Gold Fields (NYSE:GFI) shot up 4.8% in New York, but the world’s fourth largest gold producer remains down for the year after losing almost three-quarters of is market value in 2013. Investors punished the company it for its contrarian purchase of high-cost mines last year while other producers were aggressively slashing costs.

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