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Gold’s Weakness Impacted Gold Miners’ 3Q16 Results Negatively

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Gold and gold miners

This year started out on a strong note for gold and gold miners, following a multiyear losing streak for gold. The expectations of a rate hike by the Federal Reserve impacted gold prices negatively.

While Donald Trump’s win in the US presidential election was seen as a slam-dunk gold win scenario, it turned out to be just the opposite. Investors were happy with Trump’s pro-growth approach, and the expectations of a rate hike by the Fed remained firm. These factors impacted gold miners, as gold equities are essentially a leveraged play on gold prices.

When gold prices fell 11% in 2015, the VanEck Vectors Gold Miners ETF (GDX) amplified that loss by returning -25%. The reverse would be true when gold prices rise.

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Gold miners’ performance

Due to gold’s recent weak run, gold miners have also given up a significant part of their gains in 2016. However, the trend is still positive. Of all the senior miners, Barrick Gold (ABX) is leading the charge with a year-to-date (or YTD) gain of 91% on November 25, 2016.

Newmont Mining (NEM), Kinross Gold (KGC), and Yamana Gold (AUY) returned 73%, 68%, and 52%, respectively. Goldcorp (GG), on the other hand, underperformed its peers with a YTD return of only 10%.

In comparison, gold prices (GLD) gained 12% YTD while the VanEck Vector Gold Miners ETF (GDX) returned 50% in the same timeframe.

Barrick Gold and Kinross Gold have outperformed senior gold miners year-to-date. Both stocks have historically traded at a discount to their peers. Their higher leverage and the recent focus on cost improvements and operational improvements also led to this outperformance.

Series overview

Now that the 3Q16 earnings season is over, all major senior gold miners have reported their earnings for the quarter. In this series, we’ll discover which miners fared better than others.

We’ll look at various factors that are affecting gold miners such as Barrick Gold, Newmont Mining, Goldcorp, Yamana Gold, and Kinross Gold. Goldcorp (GG) forms the largest share of the VanEck Vector Gold Miners ETF (GDX) portfolio at 7.2%.

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