This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Big Breakout for Precious Metal Miners or Just Another False Start?

NEW YORK ( TheStreet) --This isn't the first time, but today's leap forward in the prices of companies that produce, mine or are streaming middlemen for gold, silver and copper was downright impressive.

My concern is that we've seen this kind of performance before, only to see the sector fizzle and fade. Yet, what has me intrigued at this point is not that companies like Pan American Silver (PAAS) skyrocketed almost 7% in one session on 50% higher-than-normal volume.

Nor that top-tier gold and silver producer Goldcorp (GG), with a market cap of over $31 billion, rocketed almost 5% higher, although on lower-than-normal volume.

It was the fact that almost every mid-tier and large-cap company in the entire precious metals (and semi-precious metals like copper) have been climbing off the bottom for several weeks, and yet they still leaped like a frog off a hot August pavement.

Perhaps this sector rally was long overdue. Many of the companies like Pan American have been trading for five or six times earnings, while the underlying precious metals prices have stayed locked in a tight yet lucrative range.

Take a look at a chart of the Market Vectors Gold Miners ETF (GDX), which also was up 3.4% on the day on lower-than-normal volume.

In the chart below I compare it with the two most popular ETFs that track the price of gold and silver.

GDX Chart GDX data by YCharts

The chart shows clearly that GDX and the sector haven't participated in the long rebound for gold and silver prices from the lows during the 2008 financial meltdown. From gold's low during 2008 of just above $500-an-ounce it has more than tripled, closing Thursday at around $1,615 an ounce.

My point is that the gold and silver producers sector isn't that much higher, and certainly nowhere near double or triple the levels of four years ago. Production costs are higher today, yet even with that and other factors considered, this is a sector that was and is overdue for a bounce.

Thursday was a day when the 10-year Treasury bond sold down again with the yield stretching up to 1.84%. Mortgage rates are tied to the yield on that Treasury bond, and they've moved higher this week as a result. That's not good news, and may help account for the rally in precious metals.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.03 -2.90%
FB $116.73 7.20%
GOOG $691.02 -2.10%
TSLA $247.54 -1.60%
YHOO $36.59 -0.97%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs