Is this the long-awaited move up in gold-miner stocks? Is that what the stocks of Agnico-Eagle Mines (AEM), Barrick Gold (ABX), Goldcorp (GG), Randgold (GOLD) (52-week-high) and even NovaGold (NG) are saying?
Seems like it.
I have mixed emotions on this one. First, these stocks have been horrid, in part, because costs for digging gold are way out of control and, in part, because the companies are all serial disappointers. They often dilute their shareholders. They pay next to nothing in dividends. They are without a doubt the most peripatetic and diffident of stocks when it comes to what they actually mine.
I know this is ironic, but I'm amazed that since today's outperformance began, the price of gold has gently started to go down.
I am not against anyone who wants to play a catch-up rally. Barrick reported a pretty darned good quarter. Randgold had a monster quarter after a series of incredible disappointments. It has finally come together for them. It hasn't come together yet for NovaGold, which is a pure spec, or Agnico-Eagle, which is still paying the price of trying to do too much too soon.
What we have learned with these stocks is that they track the vicissitudes of a very tough business. Randgold, for example, had an aggressive expansion plan that set them back big. Lots of drilling in Africa. Now it is panning out, but I don't know if I want all of that political risk.
Goldcorp had been by far the best and most reliable, however, this last quarter was a total nightmare. Go read the conference call transcript. Nothing but misery. One of the biggest, most confused messes I have come across. The CEO referenced everything but a plague of locusts getting in the way of the quarter.
So, be my guest. Try to play the catch-up rally.
I don't have the stomach for it. These stocks should have been up huge by now. Instead, they have been a perfect hedge for the speculators, a great short versus being long the bullion or the SPDR Gold Shares (GLD).
Better to leave them alone. The only one that I can see buying calls on is Randgold. It has a clear flight path. Until some greedy country decides it wants to nationalize or overtax the company's mines.