Rally in gold miners falters as gains outstripped metal’s surge

Gold’s rally has awed Wall Street for months. Gold miners have done even better – so well that investors are now asking whether historic gains in shares of Newmont Corp., Agnico Eagle Mines Ltd. and their competitors have gone too far.

The NYSE Arca Gold Miners Index was down 6% at 4:10 p.m. in New York on Friday, the biggest drop since May, while bullion fell more than 2%. Newmont sank 7.6%, Agnico Eagle Mines slid 6% and Barrick Mining Corp. retreated 6.5%. The trio had each enjoyed gains of more than 100% this year, while gold gained just over 60%.

“Traders who have been holding a long position in SPDR Gold Trust ETF are now faced with a decision – Take profits or Let it ride?” SentimenTrader’s senior research analyst Jay Kaeppel wrote in a note to clients on Friday.

The reasons for gold’s historic advance have been hard to pin down, but among the most widely accepted are that the metal is acting as a haven for investors worried about inflation, a falling dollar and political instability in some developed markets. While none of those issues have fully resolved, the past week has seen the dollar steady and the flareup in trade tensions between China and the US ease.

The rally in miners has pushed the group’s valuation to nearly $1 trillion, triple its average over the past five years.

For Candice Bangsund, Fiera Capital Corp.’s portfolio manager, current price and valuation levels suggest the heady days for miners may be coming to an end.

“The stocks have run ahead of the underlying gold price, so from here I’m not certain how much more room there is to run,” Bangsund said in an interview. As a result, she sees share prices being fairly range bound over the next 12 to 18 months.

(By Monique Mulima)