Boston, MA 10/06/2014 (wallstreetpr) – It is a well-known fact that Equity’s shine could steal gold’s glitter, and it proved right on Friday, when most of the gold miners dived into negative territories, mirroring the breakdown in gold prices. Goldcorp Inc. (USA) (NYSE:GG) lost 4.15% on the day, while other miners like Newmont Mining Corp (NYSE:NEM) and Barrick Gold Corporation (USA) (NYSE:ABX) to echoed the same reaction.
The weakness in gold driven companies comes as a result of improving economic scenario in the U.S. The U.S. closed optimistic on the last day of the week after the Bureau of Labor Statistics published data stating the addition of 248,000 jobs in the economy in the month of September. The reading came widely higher than the anticipated figure of 215,000 that helped steer the unemployment rate to a six year low of less that 6%. It is a natural phenomenon that when the economy is transitioning towards growth, then investors are prompted to value equities over safe-haven instruments like gold.
Thus, the economic recovery in the U.S. has started showing impact on gold futures and spot gold prices that went down below $1,200 per ounce. In response to the changing environment, RBC Analyst, Stephen Walker, has not lowered the target price for gold to $1,285 in 2014 and did not see it touch $1,400 until almost by the year 2018.
Risks And Opportunities
Meanwhile, Goldcorp Inc. (USA) (NYSE:GG) has been involved into a series of cost saving measures and has other projects in the pipeline. These projects should insulate it from a major breakdown but does not eliminate its risk to gold price fluctuations. According to the Zacks, the company would be able to reap yields from its cost saving techniques and productivity strategies, which is well explained from its 31% y-o-y decline in costs in the second quarter. But at the same time, the company has an increased burden of debt, shrinking gold reserves and geopolitical challenges on the horizon to be managed.