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Digging into Gold Miners’ Performances ahead of Their Q4 Results

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Feb. 7 2019, Published 12:23 p.m. ET

Gold versus gold mining companies

Gold’s price has risen 2.2% YTD (year-to-date) after falling ~1.9% in 2018. Gold (GLD) saw its fourth consecutive positive monthly return in January. 

The major driver of gold’s price during the month was the dovish stance taken by the Federal Reserve. Usually, gold prices and interest rates are inversely related. When interest rates rise, investors exit gold investments for interest-bearing ones, thus negatively affecting demand.

Gold, however, underperformed broader equity markets in January. The S&P 500 Index (SPY), the Dow Jones Industrial Average (DIA), and the NASDAQ Composite Index (QQQ) rose 8.0%, 7.3%, and 9.0%, respectively, in the period.

For more on gold’s price outlook, read Do These Factors Point to a Strong Start for Gold in 2019?

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Gold miners: A leveraged play

Gold miners (NUGT) are usually a leveraged play on gold prices. In 2018, as gold prices (GLD) fell 1.9%, the VanEck Vectors Gold Miners ETF (GDX) multiplied that loss, falling 9.3%.

The price actions in leveraged gold ETFs, such as the Direxion Daily Junior Gold Miners Bull 3X ETF (JNUG) and the Direxion Daily Gold Miners Bull 3X ETF (NUGT), were more dramatic. JNUG and NUGT saw falls of 48% and 45%, respectively, in the year.

YTD as of February 4, GLD has returned 2.2%, while the VanEck Vectors Gold Miners ETF (GDX) has returned 6.6%.

Company-specific factors

Among senior and intermediate gold miners, Goldcorp (GG) and Yamana Gold (AUY) have outperformed their peers with YTD rises of 13.4% and 16.9%, respectively. In contrast, Barrick Gold (GOLD) and Newmont Mining (NEM) have returned -1.4% each.

Gold miners’ performances have diverged greatly based on their operational performance numbers and other company-specific issues. These companies are scheduled to release their fourth-quarter earnings results in the next few weeks. Their earnings results are expected to be important when it comes to gauging their performance metrics for 2019 and beyond.

Series overview

In this series, we’ll assess gold miners’ upcoming results by considering Wall Street analysts’ expectations for their revenues, earnings, and free cash flows. We’ll wrap up the series by looking at these companies’ relative valuations as well as the catalysts that could drive their valuations going forward.

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