in gold miners and bullion are glistening with joy because of
their dramatic reversal of fortune this year.
After coming in dead last in 2013, gold miners' shares have
floated to the top of performance lists. Some strategists and
analysts see signs that 2014 may be the year gold regains its
Market Vectors Junior Gold Miners ETF (
) has vaulted an eye-popping 16% on the
this year, a remarkable comeback from last year's 61% plunge. By
contrast, SPDR S&P 500 (
) is down 5% after a historic 32% return in 2013.
Market Vectors Gold Miners ETF (
), tracking large-cap miners, has rebounded 10% this year
following a 54% nose-dive last year.
SPDR Gold Trust (
), the largest ETF tracking gold bullion, with $32 billion in
assets, has gained 4% year to date after losing 28% in 2013.
At about $1,250 an ounce, gold currently trades about $300
below gold miners' long-term expectations. And so they have to
devalue their assets further and potentially close down more
mines, according ETF Securities in London.
Gold miners may have another $113 billion of reserves to write
down. The resulting paper loss occurs when a company reduces the
book value of an asset on its income statement because the
asset's market value is lower.
However, with gold stocks having tumbled 52% in the past year
and 66% over the past three years, most of the expected
write-downs are already baked into the price, says Simona
Gambarini, associate director of research at ETF Securities.
"Gold miners are trading at a 4% discount to net asset value (
) on our estimates, the lowest level on record," Gambarini wrote
in a report released Wednesday. "Gold miners' discount to NAV is
unsustainable, and share prices will start to outperform the gold
price now that global growth is gaining pace and equities remain
Despite the rebound, precious metals and miners still trade
below their long-term 200-day, where the most violent moves up
and down tend to occur. Technical traders consider this a
countertrend rally in a long-term downtrend.
"We're not completely sold that the bear market in gold that
began in mid-2011 is over," Ron DeLegge, editor of ETFGuide.com,
wrote in an email.
"But thus far in 2014 the price action for precious metals has
been exactly what technicians would want to see ahead of a
GLD would have to regain its 2013 high of 163 a share to
confirm a bull run is under way, he added. That target envisions
a 35% rise from Wednesday's closing price of 121.
IShares Silver Trust (SLV) rose 1.7% Wednesday and regained
its 10-week moving average. It's still 6% below its 40-week line
after falling 36% in 2013.