uploads///ABX vs GC

Will Falling Gold Prices Lead to More Carnage for Miners?


Dec. 4 2020, Updated 10:53 a.m. ET

Precious metals’ flushing prices

With precious metals’ prices falling, the mining sector has been through a bloodbath in the past trading year. Investors have lost their stakes significantly in precious metals. Gold continues to trade at its five-year low. It’s hovering in the range of $1,100–$1,150 per ounce. Gold futures on COMEX—the commodity division of NYMEX—lost 5.90% on a YTD (year-to-date) basis. Other precious metals like silver, platinum, and palladium lost ~6.90%, 25%, and 15%, respectively. The last 30-day trailing performance was also negative for all of the precious metals except palladium. Palladium rose ~15.80%. Its rise was likely due to the rise in demand for gasoline-based cars.

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Due to the fall in these metals, mining companies also saw carnage. Companies like Barrick Gold (ABX), Newmont Mining (NEM), Goldcorp (GG), and Sibanye Gold (SBGL) have lost significantly on a YTD basis. The above chart compares the change in the prices of gold futures and mining major Barrick Gold.

Miners’ carnage

These companies saw a loss in their prices of ~57%, 32%, 27%, and 48%, respectively. Together, these four stocks account for 22% of the price changes in the VanEck Vectors Gold Miners ETF (GDX). Other leveraged ETFs like the Direxion Daily Gold Miners ETF (NUGT) and the Direxion Daily Junior Bull Gold 3X (JNUG) also lost significantly in the past year.

Barrick Gold is reducing its debt

Barrick Gold is a Toronto-based and world-renowned mining giant. It has been busy cutting its debt burden by selling its assets. The company is in talks to buy back some of its outstanding debt as the core mining metals continue to fall. The company may purchase as much as $750 million of notes. Barrick Gold’s 50% holding in the Super Pit gold mine hasn’t been sold yet. Whether Newmont, the owner of the other half of the Super Pit mine, buys it still remains to be seen.


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