The price of gold edged lower last week, dropping below $1,300 for much of Friday before staging a recovery after disappointing US jobs figures. Gold for immediate delivery ended the week slightly lower, down 1.7% at $1,312 per ounce.
Of course, the only practical way for most private investors to invest in gold is through exchange-traded funds. The largest gold ETF, the $39bn SPDR Gold Trust (NYSE: GLD.US), ended last week 1.6% lower at $126.36, while London-listed Gold Bullion Securities (LSE: GBS) slipped 0.9% to end the week at $126.10. So far this year, shareholders of Gold Bullion Securities have seen the value of their holdings fall by 18%, while the value of SPDR Gold Trust shares has fallen by 22%.
Gold’s big movers
Despite gold’s lacklustre performance last week, several gold miners managed to make decent gains:
Polymetal International (LSE: POLY) gained 6.9% to 663p last week, continuing a recovery that has seen its share price rise by 42% over the last month. The Russian-based miner reported an 11% increase in first-half gold production last week, as contributions from its Amursk POX plant and additional seasonal shipments of concentrate helped lift boost output. Polymetal is continuing to work on cost-cutting plans in the light of falling gold prices, and the firm told investors last week that it expects to report a non-cash impairment of between $280m and $340m on its assets in its first-half financial statements.
African Barrick Gold (LSE: ABG) ended last week almost unchanged, at 116p, but has risen by 10% over the last month. The firm reported first-half gold production of 311,838 ounces at a cash cost of $903 per ounce, last week, although the firm’s all-in sustaining cost of production, a more realistic measure of the cost of production, was $1,507 per ounce, significantly higher than the current price of gold.
Pan African Resources (LSE: PAF) rose 2% to 13.3p last week. The South African-focused miner, which has a market cap of £245m, had net cash of £48m at the time of its last reported results, and growing gold production with below-average mining costs. The firm’s full-year results are due shortly, so investors will be watching closely to see how the company has performed against the falling price of gold, and whether it is able to fulfil its promised of restarting dividend payments.
Shares vs commodities
Shares in commodity companies have outperformed their underlying commodities many times over the last ten years, thanks to their ability to magnify their gains through successful development of new resources. This free report from the Fool, “Ten Steps To Making A Million From The Market“ contains some excellent tips on identifying and investing in potential multibagger shares, including resource shares like gold miners. I strongly recommend that you click here and download it now, as it will only be available for a limited time.
> Roland does not own shares in any of the companies mentioned in this article.
