Barrick Chairman Peter Munk.J.P. Moczulski/Reuters
Wednesday's gold rout, which sent the price of bullion tumbling 4 per cent to $1,755 (U.S.) an ounce, wasn't good news for gold stocks: The 16-member NYSE Arca Gold Bugs index was down 2.8 per cent at last glance in afternoon trading – a little better than gold itself, but hardly comforting.
We took a look at the individual performance within the index, though, and found that Canadian gold stocks were hit considerably harder than the average. Goldcorp Inc. leads the carnage, followed by Barrick Gold Corp. and Eldorado Gold Corp. .
No wonder the Canadian benchmark index is suffering, even as major U.S. indexes show modest gains. The materials subindex has fallen 2.5 per cent on Wednesday, which is by far the worst performance among the 10 subindexes. This wouldn't matter much if materials were a minor element to the benchmark index, but it isn't: It has a 23.5 per cent weighting, which is not far behind the weightings for financials and energy stocks.
The sharp decline in gold and gold stocks comes just a day after we highlighted an analyst's report on why gold stocks were trailing gold itself, and why that might present a good opportunity for investors. That thesis, though, relied upon a stable or rising price for gold. With gold now falling, it seems that Canadian gold producers are happy to take the lead.
David Berman