Tuesday, September 24, 2013

UPDATED--"Gold Miners: Which Miners Can Weather Lower Gold Prices?" (GDX; ABX; GC; NEM)

Update: "Major Decline in 10-year Yield Favors Gold"
Original Post:
The front futures are down $13.10 at $1313.90. We have been guessing at an $875 print before this decline is done, sometime in Q2 or 3, 2014. At that level you will have some of the companies in violation of their loan covenants and properties coming on the market at fire sale prices.

Until then we assume a downward bias averaging 2-3% per month with plenty of countertrend rallies.
For the lunatics in the audience both Direxion and VelocityShares have triple levered bullish and bearish ETF's/N's although highly leveraged options on futures are probably safer.

In addition you can always trade the larger miners against the juniors, here's the last year of the two ETF's via Yahoo Finance:

Chart forMarket Vectors Gold Miners ETF (GDX)

As of right now we're seeing a slowdown in the rate of decline in the futures so we'd guess they stabilize or even tick higher over the next couple days.

From Barron's:
Gold prices are falling today but miners are having a far easier time.

The Market Vectors Gold Miners ETF (GDX) has gained 0.9% to $25.99, while gold futures are off 0.3% ay $1,328.60 an ounce. The rally in miners comes despite the fact that two investment banks, Citigroup and Morgan Stanley, see gold prices remaining low through 2014.
Citigroup’s new target is $1,248 an ounce, up from $1,143, and Brian Yu has updated his target prices for gold miners based on that new forecast. Barrick Gold (ABX) now has a price target of $22, up from $20, Goldcorp’s (GG) jumps to $29, from $28 and Kinross Gold (KGC) moves up 10 cents to $5.90.

Despite Citi raising its target, that $1,250 is still a lot lower than many miners were expecting to have to cope with....MORE
See also this weekend's: "UPDATED--Gold is Going Much Lower".
Last week, as a trade, we posted "$1357.40: What a Lovely Price to Sell Some Gold At.
Gold promptly went to $1375 before tuning and heading back down.
I blame Goldman:
"Goldman Flip-Flops: Sees Near-Term Upside In Gold"