Finding safety in gold miners seems a bit unlikely considering that the Market Vectors Gold Miners ETF (GDX) fell 54% last year. Barclays, however, believes that some gold miners offer “downside protection,” if the price of gold doesn’t fluctuate too much in 2014.
REUTERS Barclays’ Farooq Hamed and team explain:
Given gold equities broadly sold off in 2013 and are broadly under owned to start 2014, we believe that when capital begins to flow back into the sector (due to less volatility in the gold price), some investors will favour gold companies that offer protection from lower gold prices or leverage to flat gold prices. In our opinion, companies with production growth, shrinking operating costs, declining capital obligations and conservative balance sheets will be best suited to offer that protection or leverage.
Hamed singles out Goldcorp (GG) and Yamana Gold (AUY) as two companies that have strong production growth, falling costs, declining capital obligations and less debt than competitors. New Gold (NGD), meanwhile, should have the lowest all-on costs in the group at $731 an ounce, but its capital spending is likely to notes, Hamed says. Hamed rates Goldcorp and Yamana Overweight, while New Gold is rated Equal Weight.
Goldcorp has gained 4% to $23.20 today at 3:33 p.m., while Yamana Gold has risen 3% to $9.60 and New Gold has advanced 1.8% to $5.81. The Market Vectors Gold Miners ETF is up 2.7% at $23.22 as the SPDR Gold ETF (GLD) has risen 0.8% to $120.71.
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