During most of the last 13 years the gold spot price has been in the spotlight as a way to escape from the world of paper investments that can become vulnerable to the negative effects of inflation, deflation and even hacking of stock indices. Millions of Americans have bought gold in one form or another, and one of the most popular ways to invest in gold is through the purchase of gold coins and/or bullion.
Unfortunately, opportunity can breed misinformation and this is the fate that has befallen some gold investors. Some individuals have fallen under the impression that investing in gold stocks is the same as buying physical gold. It does not matter if you are talking about gold ETF stocks or gold mining stocks, they do not shadow the gold spot price.
This week gave us multiple examples of stocks not tracking gold. While physical gold has been on the rise and actually touched the $1300 mark for the first time in months this week, some gold stocks have suffered substantial losses. Examples include:
-Goldcorp posted a 4th-quarter loss of over $1 billion ($1.34 per share) due in part to a $763 million tax charge from the Mexican government.
-Kinross had a loss of more than $25 million in 4Q 2014 thanks to depreciation and a higher sales costs.
-Barrick Gold lost $2.6 billion during the last 3 months of 2013 and cut reserves by 26%, causing shares to fall $2.61 each.
-Agnico-Eagle shares also lost $2.61 each due to a 4th-quarter 2013 that saw the company lose $763 million.
Clearly the gold spot price and gold stocks are not tied to one another. They perform somewhat independently of each other so based on your goals and plans you might want physical gold, gold stocks or a combination of hard assets and derivatives.