NEW YORK (Commodity Online): Gold mining stocks are now witnessing an uptrend as gold prices continue to be supported by Eurozone debt crisis, US economic recovery concerns and global inflation. Newmont Mining Coprp (NYSE: NEM0 is up 4.87% this year at $64.07 while Barrick Gold (NYSE:ABX), is up 1.40% at $53.33, Yamana Gold (NYSE:AUY)is up 32.65% at $16.54.
Apart from gold rally, the margins in the industry are driving valuations of stocks higher according to a report in Seeking Alpha. " The typical miner has production costs south of $600 an ounce, and is actively selling gold for $1,800+. Newmont (NEM), for example, reached a 27.68% profit margin in Q2, about on-par with red-hot Apple Computer (AAPL) at 25.58%," the report said.
Annualised yields of major mining stocks have outperformed 3-year US treasuries. Newmont Mining's yiled at 1.10%, Yamana Gold at 1.10%, Agnico Eagle Mines (NYSE: AEM) at 0.9%, Barrick Gold at 0.90% and Kinross Gold Corp (KGC) at 0.68% and Market Vectors Miners Index (NYSE: GDX), the exchange traded fund focussed on gold miners have outperformed 3-year treasury yield of 0.32%.
Mining stocks are much more liquid than bullion coins and bars from the investor point of view. According to BlackRock, a major fund manager, gold equities have underperformed gold by 25 to 30% in 2011, but if gold prices remain at these levels, the gap would narrow down which presents a good buying opportunity to investors now.
BlackRock's World Gold Fund holds shares of companies including Newcrest Mining, the world's No.3 gold miner, and Kinross Gold, one of the fastest growing gold miners in the world. The fund had $8.34 billion of assets under management by July 31.
