Gold Miners outshine Copper Miners

At yesterday's meeting for investors, Rio Tinto plc (NYSE:RIO) offered a subdued forecast for the iron ore and copper markets going forward.

There was some upbeat talk about new projects in Mozambique and Mongolia, but reporters and investors homed in on CEO Tom Albanese's comment that markets are somewhat weaker than they were 6 months ago.

That observation pummeled Rio's shares as well as shares in BHP Billiton plc (NYSE:BHP), Vale S.A. (NYSE:VALE), Freeport-McMoran Copper & Gold Inc. (NYSE:FCX), and Southern Copper Corp. (NYSE: SCCO) pushing stock prices near or below 52-wk lows.

The other side of the mining coin is a bit more positive though. Gold miners Newmont Mining Corp. (NYSE: NEM), Barrick Gold Corp. (NYSE: ABX), and Yamana Gold Inc. (NYSE:AUY) have seen their share price rises outstrip Bullion price rises for the first time in at least a year.

The SPDR Gold Trust (NYSE:GLD) has lost about -5% of its value in the last month, while the gold miners are all up more than 1% and Newmont is up nearly 8%.

The Market Vectors Gold Miners ETF (NYSE:GDX) is up about 1% in the past month, but the Market Vectors Junior Gold Miners ETF is down close to -5%.

In silver, the story more closely follows the copper downturn. Silver Wheaton Corp. (NYSE: SLW) is up about 1% in the last month, while the iShares Silver Trust (NYSE:SLV) is down about -9% and the Global X Silver Miners ETF (NYSE:SIL) is off nearly -5%.

Copper prices have been trending downward more strongly for about the past six weeks. Since posting a high above 4.60 lb in February, copper now fetches about 3.55 lb.

Weaker economic forecasts for the developed countries have caused some of the decline, but that has been more gradual.

The 600-lb gorilla is China, where Rio's CEO said that there is evidence that the Country is de-stocking as the Chinese government tightens lending in an effort to cool inflation. The side-effect of that tightening is that growth is also slowed, reducing demand for Copper and Iron ore.

China's de-stocking has been developing gradually over the past several months, but Mr. Albanese's admission is the 1st statement from a major player in the mining sector that the sharp upturn in commodity prices has now turned south. The question, of course, is when it will turn back North again.

Commodity prices on everything from food to oil have been falling as demand expectations are adjusted to account for nearly universal slow growth.

The Key for copper and iron ore producers is China.

Rio's CEO made a special note of saying that the company's largest Chinese customers are not showing any sign of slowdown. But, remember, he also said that there is evidence of de-stocking. Which is it?

The signals all point to a Chinese slowdown in both manufacturing and construction. But the Copper and Iron ore miners are hopeful that the low price for Copper will spur a new round of buying.

Copper is trading down almost -6% today, and gold is off more than -2%, at around 1,765 about an hour and a half before markets open this morning.

Rio's price is now 47.96, about -6.5% lower than the new 52-wk low the stock posted yesterday.

BHP is also below its 52-wk low, at 68.56 in the pre-market, down about -4.75% from yesterday's close. Vale is down about -3.5%, at $24.41, just pennies above its 52-wk low of 24.08.

And Freeport-McMoran is down more than -4% from yesterday's close, at 34.10, well below the new 52-wk low of 35.56 that the stock posted yesterday.

Southern Copper is down about -1.5% in the pre-market, at 27.50, just pennies above its new 52-wk low set yesterday.

Gold miners moved down Thursday morning, probably following the downward move in Gold.

Newmont is off about -2.5%, at 66.00, in a 52-wk range of 50.05-71.25.

Barrick is off nearly -3%, at 51.75, in a 52-wk range of $42.50-55.95.

Yamana is off nearly -3.75%, at 15.79, in a 52-wk range of $10.41-17.47.

It is interesting that these Gold miners' shares traded quite near 52-wk highs yesterday.

 

Paul A. Ebeling, Jnr

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.