Gold prices and gold mining stocks have provided investors glittering returns despite a very tough August for stocks. The S&P 500 Index fell -4.7% but the SPDR Gold Trust (NYSE: GLD), an exchange-traded fund (ETF) pegged to the spot price of gold, is up +7.2%. Gold mining stocks have performed even better. Over the past four weeks the Market Vectors Gold Miners (NYSE: GDX), an ETF containing the biggest gold and precious metals mining companies, has surged +11.2%.
But can this gold rush continue?
Over the past year, gold has definitely been the place to be. Consider that the S&P 500 has posted a very respectable 12-month gain of +9.9%. Compare that to the SPDR Gold Trust, which delivered investors a +30% gain over the last 12 months, and the Market Vectors Gold Miners with its +36.9% performance over the past 12 months, and there really is no comparison.
As you can see by the above chart of the SPDR Gold Trust, gold prices spiked in August as buyers fled to the safety of gold. With stocks beginning to tank, and as fears of a global slowdown and possible double-dip recession in the U.S. started really ramping up, the smart money decided it was time go for the gold. Gold prices surged above the technically significant 50-day moving average in August, and gold prices now are on the verge of hitting a new 52-week high.
The same story holds true for the Market Vectors Gold Miners. This mining-stock ETF has been more volatile than the SPDR Gold Trust, but it’s also been more profitable for investors. As you can see by the above chart, GDX also broke above its 50-day moving average in August, and the fund also is now pushing toward a new 52-week high.
The top holdings in the Market Vectors Gold Miners, stocks like Barrick Gold Corporation (NYSE: ABX), Goldcorp Inc. (NYSE: GG) and Newmont Mining Corp. (NYSE: NEM), all have had stellar runs of late as well. Investors who prefer to buy individual stocks rather than ETFs also have demonstrated their willingness to go for the gold via these mining stocks.
Despite investors’ embrace of all things gold, we’re left with the question of whether the recent gold rush will continue. To be certain, gold is at a critical level right now. If the price of gold and the ETFs tied to its fortune can break into new high territory, then we could see another big leg up for the yellow metal. But if stocks were to build on the outstanding day they had to kickoff September, gold may lose a bit of its luster.
I suspect that the fear over a struggling economy will keep investors enamored with gold for some time, and that means investors can still profit from the sector’s glitter.
As of this writing, Jim Woods did not own a position in any of the stocks named here.
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