Gold Stages Biggest Rally Since 1999 and No One Noticed

Gold partied liked it was 1999 in the month of November (sorry- I couldn’t resist) as the yellow metal gained 14% for its largest 1-month rally since Sep 1999.

Even set against the new record high gold set earlier in the year- November’s gain was impressive.

It was also largely ignored by the media and investors, however, mainly because gold continues to trade well below those all time highs. And the media only likes to talk about something if it’s “new” or a “record.”

Gold closed November at $816.20, still over 20% below its earlier high.

But gold investments are clearly outperforming equities.

The iShares Gold ETF (GLD) is down only 2.61% YTD compared with the S&P 500 which is down 37.66% during that same time period. GLD rose 12.57% in just November alone.

Gold is Up but Gold Mining Stocks are Down

Not all gold investments are created equal. The gold miner stocks have been hammered as the overall stock markets have sold off. The Gold Miner ETF (GDX) is down 42.02% YTD.

However, November showed a turnaround, even in the gold mining stocks. The GDX was up 26.83% in the month, well outpacing the S&P 500 which rose only 8.00% in the same period.

With the trouncing of the mining shares, the GLD, which follows the price of the physical gold, appears to be the much better investment. GLD isn’t going to need to obtain financing during a credit crunch in order to physically retreive the metal (as some gold miners are having trouble doing right now.)

Some Miners Are Interesting Plays

Just like gold itself, not all gold miners are created equal either. You have the junior miners which may have some gold in the ground but no way to get it out.

There are also the big majors- many of which have so much debt they are nearly drowning on bad financing.

Then there is a small, select group of miners that are actually profitable.

Has this sell-off created buying opportunities?

Yamana Gold (AUY) traded as low as $3.31 during the recent sell-off but has rallied off that low. It closed last Friday at $5.81. That is well off its 52-week high of $19.93.

Yamana is a large miner that actually makes money and has a strategy in place to expand production for the next several years. It also doesn’t mine in Africa, which we’ve seen in recent years can be unstable both economically and due to its infrastructure deficiencies (power outages etc).

Barrick Gold (ABX) is another one of the big boys that is profitable. Barrick also is trading well-off its highs. It closed Friday at $29.46 with its 52-week high of $54.74. Barrick also mines silver, copper and zinc for a bit of diversification.

As always, do your own research before investing- especially with the miners which are subject to the whims of developing and emerging market nations.

Will Gold’s Winning Streak Continue?

One month does not make a trend. But gold continues to be resilient as a safe haven during this market turmoil. Gold bullion traders around the world are reporting unprecedented demand for the yellow metal (in coins, bars, and jewelry.)

Eventually, we’ll see this in the price. Gold prices have been pressured by heavy hedge fund selling (due to redemptions.)

While no one can predict the price of any commodity given the global crisis, history has shown that gold has some unique properties that sets it apart.

I wouldn’t bet against it just yet.

(In full disclosure, the author of this article owns shares of GLD, GDX and AUY.)