Mining Sector Grapples with Falling Precious Metal Prices
GDX component companies
As the precious metal sector has taken a hit this year, so has the mining industry. With gold prices sliding almost 10.7% for the year, the SPDR S&P Metals and Mining ETF (XME) and the Market Vectors Gold Miners ETF (GDX) fell by a whopping 48.3% and 19.1%, respectively, year-to-date.
Mining companies Barrick Gold (ABX), Pan American Silver (PAAS), Newmont Mining (NEM), and Goldcorp. (GG) have lost 36.7%, 28.8%, 2.8%, and 39.7%, respectively, year-to-date. These four giant mining companies together are 21.2% of the Market Vectors Gold Miners ETF (GDX).
Higher 12-month targets
All the component companies listed above are currently trading below their 12-month target prices. This may suggest undervaluation. Goldcorp, Newmont, Pan American Silver, and Barrick Gold are expected to rise to 57%, 23%, 12%, and 19%, respectively, within a year, according to analysts’ estimates.
The 100-day moving average prices suggest that Goldcorp is trading at a 10% discount to its 100-day average. However, Newmont Mining, Pan American Silver, and Barrick Gold are trading at 6.4%, 2.4%, and 5.1% premiums to their 100-day moving averages. The data likely suggest that Goldcorp is comparatively undervalued. The GDX ETF is also trading almost 1.8% below its 100-day moving average price.
All these stocks are trading substantially above their 20-day moving prices. But over the last year, downward-determined precious metal prices have led to an underperforming mining sector.
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