2013 was a rocky year for commodity traders, specifically gold mining companies. Ever since the 2008 crisis in the global banking industry, the necessity of commodity traders has become rather hazy. Considering that the price of gold has been fluctuating over the last couple of years, it’s no wonder that people are more prone to buying and selling the precious yellow metal directly. Plus, they also have that notion that value decreases with the third party, and all that traders are good for is limiting marginal profit for both the producer and the investor. So only one question remains: Have gold mining stocks become obsolete?
Surprisingly, the answer is no.
Despite the minimal improvement in gold’s current price, mining stocks seem to be on the rise. In a MarketWatch article posted back in February, it was explained that it only took two months for gold shares to regain more than a third of the value lost last year. The losses from 2013 must have ignited a fire in mining companies, forcing them to factor in their negative activity to improve their competitive strategies. It’s also worth noting that trends in gold mining companies tend be exaggerated, both positively and negatively. On the bright side, Brien Lundin, editor of Gold Newsletter says that “they’re leveraging the move to the upside”, as the worst appears to be over.
One of the gold mining frontrunners, Newcrest Mining Limited (ASX: NCM), has rebounded remarkably in these past six months with a 40% increase in price. In January the share was undervalued at $6.96, but as of today it’s priced at $10.40. The value increase of gold mining stocks is evident when compared to the cost of gold itself, which currently stands at $1,277.50 per ounce.
No matter how unsteady the industry may be, gold will continuously be high in demand, and its popularity as an investment option will persist. Gold shares may have hit rock bottom last year, but they have since weathered the storm. This shows that gold mining stocks are not obsolete, regardless of what others may believe. Investors can get more advice here on BullionVault if they are interested in contributing to the gold trading market.
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