The largest ETF that invests in gold miners dropped to a fresh 52-week low on Thursday as producers saddled with higher costs continue to lag bullion prices.
“Capital spending by the largest gold producers is increasing at a faster pace than earnings for a second straight year as the industry’s biggest mining projects are beset by delays and surging labor costs,” Bloomberg reported Thursday.
Although gold miners posted solid first-quarter earnings, investors are worried about the potential impact to the sector if bullion prices continue to trend lower, writes James Brumley at InvestorPlace.
Still, experts say mining stocks are priced as if gold is trading at $800 an ounce, rather than its current price above $1,600. Some hedge fund managers have positioned for gold miner stocks to close the performance gap with bullion prices, but it hasn’t played out.
“Volatile equity markets, environmental regulations and rising costs for miners create head winds that physical gold doesn’t encounter,” writes Amine Bouchentoufat at Hard Assets Investor.
Market Vectors Gold Miners