With most areas of the market losing their luster this month, one sector that's glittering is gold. Since the beginning of the month, the Philadelphia Stock Exchange Gold and Silver Index is higher by 7.8%. Shares of Newmont Mining ( NEM) -- which reported fourth-quarter results today -- are up 11.3%, while AngloGold ( AU) is ahead 10.3% for that period. "When the price of gold broke out of a trading range -- it had been stuck between $270 and $280 -- investors had a reason to jump on board," said Michael Dudas, an analyst at Bear Stearns. But he adds: "There is volatility in the gold market. And it is close to an overbought condition in the near term." For the month, the April gold futures contract is ahead about 6%. It rose above $300 during the day -- a psychologically key level, experts said -- before settling 30 cents to $298.10. Gold stocks also retreated from their recent levels, with the Gold and Silver Index ending down about 4% Wednesday.
Precious metals have perked up at an opportune time, with their usual safe-haven status enhanced by the increased jitters in the stock and bond markets. In addition, currency weakness -- the yen, dollar and euro have all been under pressure -- has bolstered bullion prices. "The sustained desire for hard assets as a risk hedge has underpinned gold's recent activity," said Rhona O'Connell of the World Gold Council, in a note Wednesday. "This is a bull market for gold, but investors should exercise caution," said Caesar Bryan, manager of the Gabelli Gold Fund. "A dramatic movement tends to correct itself in some manner." Lately, gold producers have been reducing their hedges, or forward sales used to lock in minimum prices. The trend is bullish for gold because it reduces selling pressures in the market and indicates the companies think prices could rise. AngloGold last week said it decreased its hedges by 20% in 2001, as Marc Dupee reported earlier on RealMoney.com, a move that preceded the rally in gold prices.
On Wednesday, Newmont Mining -- which doesn't hedge -- reported an increase in fourth-quarter earnings, as a result of on-target gold production, cash costs and, importantly, higher gold prices. The gold producer said it earned $31.7 million, or 16 cents a share, excluding merger costs and certain noncash items, reversing a loss of $33.5 million, or 17 cents a share, a year earlier. Including items, Newmont earned $20.2 million, or 10 cents a share, in line with expectations. "We are pleased by the strengthening gold price over the past six months, with it currently trading above $290 per ounce, and welcome analysts' forecasts for an improved average gold price in 2002," said Wayne Murdy, chief executive officer of Newmont Mining, in a written statement.