Fool's Gold Report: Miners, Bullion Jump As Investors Ignore the Fed's Taper


Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Stock market volatility again had a big impact on the precious-metals markets today Wednesday, with another downward move for the Dow of nearly 200 points helping to support substantial gains in gold and silver. SPDR Gold Shares climbed about 1.25% today, following gold's $12 per ounce rise to $1,268. Silver's less substantial gain of $0.15 per ounce to $19.71 led to a 0.9% rise for the iShares Silver Trust . Platinum-group metals were mixed, with platinum rising $2 per ounce to $1,409 but palladium giving up $2 per ounce to $713.

Many expected the Federal Reserve's monetary-policy announcement to be potentially a market-moving event for gold, but for the most part, the Fed's further tapering of $10 billion per month from its bond-buying activity was exactly what investors had thought the central bank would do. As a result, gains in the gold market were more likely tied to emergency action to help stabilize emerging markets, with Turkey dramatically raising its key lending rates, while South Africa and India have made more modest moves over the past couple of days.

Moreover, news from the mining front helped support bullion prices as well, as the Market Vectors Gold Miners Index jumped 2.6%. Hecla Mining reported its preliminary production results from 2013, with the stock rising almost 2% as Hecla said that it mined 8.9 million ounces of silver and 120,000 ounces of gold last year. Cash costs more than doubled in the fourth quarter, but that was mostly because the company's Lucky Friday mine came back on line last year and had higher costs than its Alaskan Greens Creek mine. Looking forward, Hecla is optimistic about 2014, projecting 9.5 million to 10 million ounces of silver production and 180,000 gold ounces for the year.

Image sources: Wikimedia Commons; Creative Commons/Armin Kubelbeck.

But not all mining stocks rose. Coeur Mining lost almost 1% after bond-rating agency Moody's downgraded the silver miner's corporate-family bond rating and existing senior unsecured note rating by one grade each, pushing Coeur's bond rating further into junk bond territory. Despite Coeur's efforts to cut costs, Moody's looked unfavorably at its relatively high expense structure, especially with the threat of lower bullion prices in the future. The move shows the struggles that mining companies are facing right now as they hope that further declines in gold and silver prices don't occur.

Now that the Fed has acted, the big question for gold investors is whether bond yields start to rise. So far, bonds are behaving well in light of falling stocks, but if rates start to rise, it could put an end to the rebound we've seen in gold and silver so far in 2014.

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