Investors digging those gold stocks
By Emily Church, CBS MarketWatch
Last Update: 4:44 PM ET Nov 5, 1998 NewsWatch
NEW YORK (CBS.MW) -- Investors rushed into U.S. gold stocks Thursday for a second day, showing even greater enthusiasm than they seemed to show for the actual yellow metal.
The Philadelphia Stock Exchange Gold and Silver ($XAU) rose 4.9 percent on Thursday on the heels of an 8.3 percent climb Wednesday. As for the price of the metal, December gold rose $3.10 to $294.80 an ounce on the Commodities Exchange division of the New York Mercantile Exchange.
Still, the price of gold is close to its lowest point in almost 20 years.
Speculation about merger and acquisition activity and 'hedge fund buying' swirled through the gold community. Gold companies, seeking to reduce their costs for producing gold, have been in a consolidation mode for the past several years.
Investors in gold stocks are also taking encouragement from gold's recent ability to stay above $289 an ounce, said Merrill Lynch analyst David Christensen.
The rally in the stocks has been powerful, with stocks like Newmont Mining Corp. (NEM) climbing 1 11/16 to 24 11/16 Thursday, up from its 52-week low of 13 1/4 in late August. Still, Newmont has slumped from 62 in the last couple of years, Christensen said.
"The gold price declined to a point where a major portion of this industry is either unprofitable or break-even," he said. Signs that gold is holding support and isn't setting new lows despite the bearish fundamentals in Asia, "has an immediate impact on the bottom line."
Among the gold and silver stocks: Barrick Gold Corp (ABX) rose 1 1/2 to 23 1/2; Battle Mountain Gold (BMG) rose 5/16 to 5 15/16; Placer Dome, Inc. (PDG) rose 1 to 17 5/8 and Hecla Mining Co. (HL) rose 1/4 to 4 13/16. Homestake Mining shares rose 1/8 to 12 3/4.
Other metals of the non-ferrous variety also gained as investors speculated the world's suffering economies in Asia and Latin America are poised to rebound : Aluminum Co. of America (AA) rose 11/16 to 80 and Reynolds Metals (RLM) was up 1 7/16 to 59 15/16.
Some investors are likely looking out 12 months ahead and are buying into the metals group, which they think will do well coming out of a recession. They're taking heart from recent U.S. auto sales reports, for example.
Signs that the economy is slowing might take the wind out the stocks' sails, Christensen said. |
