November - Gold Gains 6% While Silver Soars 20%

November - Gold Gains 6% While Silver Soars 20%

December 4, 2010

By:  Marco G.

http://goombarhsedge.blogspot.com/

November, 2010 was a time of ups and downs and to make sense of it all the author did some calculations and took a look at some charts.  Following are the charts with some commentary.  I took the date of Wednesday November 3^rd, 2010 as the baseline since that was the day the FOMC made their announcement of further treasury support.

Since we are in a precious metal bull, I look at Gold first.  Using the GLD ETF as a proxy, we see that Gold has gained 6% for the month.  This gain was accomplished in one week and the rest of the month was spent in a fake dip downwards into a rounding bowl shape.  This prompted many forecasters to call a peak in precious metals and for investors to brace for a heavy fall downwards.   It was only in the last week, that Gold moved up to almost complete the bowl shaped recovery.  It is not apparent here, but in other leading indicators such as a few Silver miners, they are showing new strength in new highs.

Next we look at the GDX ETF of about 30 major Gold miners.  The GDX has gained 12% for the month, leveraging the precious metal by 100% or a factor of 2 times.  The shape of the GDX curve generally follows the price of Gold, shown by the red trace on the chart.

Looking at the Juniors version of the Gold ETF, the GDXJ we find a 18% gain over this period.  The Junior miners ETF includes about 60 smaller companies that work in the Gold mining area (some companies such as GBG appear in both ETFs).  The GDXJ gain is three times the gain of Gold’s 6%.

Goldcorp (GG) was one of my favourite Gold miners being a solid low cost miner based in politically stable jurisdictions.  They gained 7% versus the 6% of Gold itself.  Of late, Goldcorp has been losing my respect due to their non-response to my telephone calls to their investor relations and non-reply to my emails to their board of directors.  The author had penned an article critical about their purchase of Andean Resources, and I wanted to give Gold Corp a chance to rebut my criticism. The market shares my ennui and does not give Gold Corp any leverage to the price of Gold itself.

Next looking at Barrick Gold (ABX) we see that they have gained 12% in the past month versus the 6% of the precious metal.  Barrick is leveraging the gains of Gold by another 6%.

To round up the big three of the large Gold miners, we look at Newmont’s (NEM) 7% gain for the month.  Again, Newmont is not sporting too much leverage over Gold’s 6% gain. 

One of the reasons, the large Gold miners are not providing much leverage may be the popularity of the gold ETFs that are proliferating as explored in this previous article.  There may be other reasons such as the escalating costs of mining and difficulties at replacing mined out reserves.

Next up is the author’s favourite Gold Junior miner, Great Basin Gold (GBG).  It has only moved 4%, underperforming the Gold price’s move of 6%.  Great Basin is suffering the market uncertainty to its announcement of being under watch by MHSA, the federal Mine Safety and Health Administration.  However, interested investors should be aware, that Great Basin has found some bonanza grade areas in their Hollister mine as detailed in a previous article here.

We also take a look at New Gold (NGD) which has been solidly outperforming at a 31% gain for the month.  This was due to their excellent third quarter results announced November 4, 2010.

Finally for the Gold companies, we look at Eldorado Gold’s (EGO) chart and find a 5% gain.  Eldorado is still digesting its merger with Sino Gold of last year (share dilution).  Eldorado was a competitor of Gold Corp’s in bidding for Andean Resources.

I look at Silver using the SLV ETF (SLV) as a proxy.  Silver gained 20% for the past month, again hitting the $29+ peak hit earlier in the month on November 9^th, 2010.  This is compared to Gold’s 6% gain.  Looking back to a previous article comparing Silver and Gold we find the previous 50% leverage to Gold has now become 333% leverage in November.  Note that the GLD trace is shown in red on the chart above.  This rapid rise in Silver may be due to the increasing media attention to Silver as a precious metal moving higher. 

The SIL ETF (SIL) of Silver miners is showing a nice 26% gain for the month.  That is 6% more than the gains for the Silver metal.  Note that the Silver miners are reaching new highs, leading the way for the precious metals.

My “Crème de la Crème” of Silver companies, Silver Wheaton (SLW) is sporting a spectacular rise of 35% for November.  Note that SLW is breaking away from the high reached earlier in the month.

Silver Standard Resources (SSRI) shows a gain of 18% for the month, underperforming the rise of Silver itself.  This may be due to the divestiture of 50% their Snowfield and Brucejack properties to their former CEO’s company “Pretium Resources.”

Hecla Mining (HL) shows an outstanding move of 54% for the month.  Hecla announced an outstanding quarter on October 26^th, 2010.

Next we look at one of my small Silver juniors, Canadian Zinc (CZICF, TSX:CZN).  They actually turned in a loss of 2% for the month.  This is due to their drilling being shuttered for the season, in the arctic weather. 

Next up is the new Silvermex (GGCRF, TSX:SLX) formed from the merger of Genco Resources and the old Silvermex.  GGCRF is showing a gain of 44% for the month, mainly on optimism post merger.  Note that Silvermex has recently conducted a $15 million private placement and is awaiting approval from the TSX exchange.

Last of our charts is US Silver Corp. (USSIF, TSX:USA), which is sporting a 29% gain for the month.  Towards the last half of November, the USSIF stock is showing some hesitation.

Summation of the Charts

Companies	Symbol	Nov 3 2010	Dec 3 2010	$ Diff.	% Diff.
Silver
iShares Silver Trust ETF	SLV	$        23.85	$        28.62	$           4.77	20%
Global X Silver Miners	SIL	$        20.70	$        26.08	$           5.38	26%
Silver Wheaton	SLW	$        29.10	$        39.31	$        10.21	35%
Silver Standard Resources	SSRI	$        23.75	$        28.02	$           4.27	18%
Hecla Mining	HL	$           6.80	$        10.49	$           3.69	54%
Canadian Zinc	CZICF	$           0.65	$           0.64	-$          0.01	-2%
Silvermex	GGCRF	$           0.54	$           0.78	$           0.24	44%
US Silver	USSIF	$           0.52	$           0.67	$           0.15	29%
Gold
SPDR Gold Trust	GLD	$      130.75	$      138.05	$           7.30	6%
Market Vectors Gold Miners	GDX	$        56.80	$        63.73	$           6.93	12%
Market Vectors Junior Gold Miners	GDXJ	$        36.40	$        42.98	$           6.58	18%
Goldcorp	GG	$        44.10	$        47.09	$           2.99	7%
Barrick Gold Corp	ABX	$        48.20	$        54.02	$           5.82	12%
Newmont Mining	NEM	$        58.40	$        62.37	$           3.97	7%
Great Basin Gold	GBG	$           2.80	$           2.90	$           0.10	4%
New Gold	NGD	$           7.75	$        10.16	$           2.41	31%
Eldorado Gold Corp	EGO	$        17.80	$        18.74	$           0.94	5%

After this exercise of understanding the movements this month for the various stocks, the author is reassured.  Silver is definitely rising rapidly, and outpacing the rise of the Gold price.  Junior Gold miners are leveraging the gains in the Gold price.  Large Gold miners are barely able to keep up with the price of Gold.  For large Silver miners, they are moving quickly with their individual stories and some of  their moves upwards have been spectacular.  The junior Silver miners are continuing their leverage of the Silver price, all dependent upon their individual stories.  Silver miners appear to be giving the best gains to astute investors.

Disclosure: The author is long junior precious metals miners.

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