Gold has been a crummy play for investors

The metal is down about 5% this year and 11% since last fall's highs. A strong market and stronger dollar are at play. And gold often slips at the start of the year.

By Charley Blaine Mar 15, 2013 5:46PM
If you're a gold fan, you might be concerned. Gold (-GC) is down a touch under 5% for the year. And that's not supposed to happen.

In truth, gold moved higher in New York on Friday, settling at $1,592.60 an ounce, up $1.90. But it ended 2012 at $1,675.80.

The weakness isn't limited to physical gold. The SPDR Gold Shares (GLD) exchange-traded fund is down a touch under 5% this year. So is the iShares Gold Trust (IAU) ETF. They should be since they're designed to track the price of bullion. So far, this year, gold has trailed stocks by a pretty good margin.  The Dow Jones industrials ($INDU) are up 10.6%. The Standard & Poor's 500 Index ($INX), up 9.3%. It also has trailed crude oil (-CL), cotton and wheat (-ZW).

The picture is actually worse than it looks. Gold hit its 2012 peak of $1,796.50 an ounce on Oct. 4, and is down more than 11% since.

 It's also down about 16% from its all-time high, $1891.90, set in 2011. So are the two ETFs. The Dow and S&P 500, however, are up 6.7% since Oct. 4.

In addition, the Amex Gold Bugs Index ($HUI) is down nearly 20.8% this year. The Philadelphia Gold/Silver Sector Index ($XAU) is down 18.8%. Both indexes track the stocks of gold producers such as Newmont Mining (NEM), Barrick Gold (ABX) and Freeport-McMoRan Copper & Gold (FCX).

Newmont is down 14.6% this year. Barrick is off nearly 18%. Freeport-McMoRan is off about 1%, but it's also down 20% since peaking at $42.64 on Sept. 14.

At least four factors are weighing on gold this year:
  • The dollar is higher this year, particularly against the yen (+9.5%), the euro (+1.7%) and the British pound (up nearly 8%). The dollar's gains reflect the expectation that the Japanese government wants to reflate its economy, to get it to grow again. That means a lower yen. The strength against the pound and euro is a function of weak economies across most of the continent.
  • Stocks are higher and have pulled cash from gold and other speculative vehicles. Like Apple (AAPL). Yes, Apple Its decline since mid-September parallels gold. 
  • A stronger U.S. economy. You may not believe it, but it is true that housing is gaining strength. Manufacturing is relatively strong, especially motor vehicle manufacturing. Job growth is steady, but expanding.
  • There are concerns the Chinese economy isn't as strong as many would think or hope.
Plus, gold is often weak at the start of the year.

It is true that gold has moved higher every year, starting in 2001. But gold often drops in the first few months and gains strength as the year moves on.

In 2005, gold fell 5.6% through Feb. 9 but finished up 18.2%. In 2009, the decline was 8.7% before finishing up 24.2% for the year. 

In 2011, gold fell 7.25% before the debt-ceiling battle and downgrade of U.S. debt set off panic buying that pushed the metal to $1,891.80, up 33%. But gold settled back to $1,566.80 by year-end, up 10.2%.

Yes, gold was up 5.8% in 2008, but the price collapsed right along with markets in the financial crash. On Nov. 15, 2008, gold was actually down 15.6% for the year at $704.90. But then it rebounded sharply, ending the year at $883.60, up 5.8%.

My colleague Anthony Mirhaydari believes gold and other metals are about to surge. Seasonality may play a role. There's always a chance of another euro crisis or Middle East shootout. And another debt fight may erupt. But I'm not sure Washington really wants one. Nobody will win.

More on Top Stocks
22Comments
Mar 15, 2013 7:33PM
avatar
Follow the yellow brick road.  Just remember that THE GREAT OZ IS A FAKE!
Mar 16, 2013 5:37PM
avatar

GIL.....Cost of processed Gold to Market per troy oz., ranges from low of about $385 per to as high as about $600...Depending on Miner, grades of Ore and location of Mines..

Any Miner spending $1200 per would not be in business long.

 

Although these Companies may fanagle some figures, for Guidance purposes...You are correct,

in your thinking about prices going too low...They will drop or slow production to get prices back up.

Many mines have been shuttered in the past, because of this and poor grades..Per ton of ore.

Mar 18, 2013 6:32AM
avatar
You all realize that a new Pope who says right off... " the Church must be poor and help the poor..." is likely to sell off gold when the price is high and distribute it's wealth. Those two factors alone can drop the price by half or more as supply exceeds demand. It won't matter what miners do.
Mar 16, 2013 11:32PM
avatar

Yup, people don't seem to want face facts, of what may be driving Gold or other Precious metals..

There are several factors, coming into play....IMO

Overall Market prices...

Supply and Demand...

Safety factor in currencies...

Inflationary Pressures..

Central Bank purchases...(S&D)

Value of U$D, but I think all currencies are involved.

And no doubt our old friend, printing them dollars.

Along with values in other World Commodities.......Just sayin' and guessing ??

Mar 16, 2013 5:26PM
avatar

Well actually, we do get dividends on our Gold investments in our miners or Miner.

 

It's about 1.3-1.4%, it's not much, but not zilch...

 

We don't trade, buy/sell for the dividends..We buy/sell for the appreciation on cycles,,,And have gotten from 20-35%, depending on the trades and which years?

BUT, it is very true Gold has been down and/or stagnating for around or over 18 months now..

Depending where/when you might have bought in at..

And personally believe we have some sun-shiney days ahead yet...IMO.

Mar 15, 2013 6:04PM
avatar

Welcome to "Investor Beat"..

 

Seems we have two Articles on the "front page" about Gold..

 

That ought to tell investors, SOMETHING about it.....They are talking again..

Off to the Casino....NOW. !!

Ciao.!!

Mar 16, 2013 5:16PM
avatar
What does one expect. Gold came from $750.00 in 2008 to about $1,600.00 now. Gold will climb with time because of all the debt that all the countries in this world carry. Countries are hurting so much like japan that they have to devalue their currencies to sell their products. This country prints $85 billion a month to try to devalue it's currency. Gold will never go below $1,300.00 - $1,400.00 because it takes about $1,200.00 to dig out an ounce of gold and that is break even money. If gold ever comes near $1,200.00 miners would stop digging and therefore increase demand again.
Mar 16, 2013 10:37PM
avatar
The Dow opened at 8279.63 on 1/20/09. The Dow is at 14,514 or 75.29% HIGHER.

 Gold was 859.00 on 01/20/2009.   April gold closed at 1592.60 or UP 85.4%.

These are facts easily verifiable. Thus Gold has out performed the market by 10 full percentage points during Obama.

 

But these increases are due to Helicopter Ben Printing like a mad man...  This will not end well... 

Mar 16, 2013 12:13PM
avatar
When assets with intrinsic values become relatively less costly is when you should buy a little?
Mar 18, 2013 10:09AM
avatar

As we ponder this morning about another Past St. Patrick's Day and another Pope being installed, the World moves on with such issues as Cyprus....

 

And our Gold  position moves up 2.5% on the News...Gold is a fickle mother...

 

For every ounce of Gold the Vatican wants to pass out...Someone will be there to snap it up...

Mostly right now, would be their neighbors to the East....

Or maybe a few Central Banks such as China, Germany or the Sheiks.

Mar 17, 2013 11:00AM
avatar

Pat..That may be, because near 50% of our income comes from ideas like yours...

 

We don't draw, but re-invest at present, so it's a nice gainer for the time being...

Any income from Gold at this time is Nil, but we are looking forward not at the past or the last 18 months...Time will prove whether we are correct or not.

 

At the present good stock/equities are there to pay the bills if necessary, or a way to partially preserve our savings..For a later date or our children...My goal is only for us to be comfortable with a cushion.

Mar 16, 2013 10:10AM
avatar

Gold lovers can`t stand facts,but, the market has doubled in 4 years plus I get

lots of dividends.Show me the dividends in gold?

Mar 17, 2013 10:46AM
avatar

The Archie Bunkers` who arn`t smart enough to pick good stocks love gold.One half

of my income comes from the great stocks I`ve picked.

Mar 15, 2013 11:08PM
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

112
112 rated 1
270
270 rated 2
444
444 rated 3
693
693 rated 4
637
637 rated 5
692
692 rated 6
615
615 rated 7
498
498 rated 8
265
265 rated 9
126
126 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.