Gold Stocks (GDX) Slide, Outlook for Platinum Improving?

GOLD STOCKS NEWS – Gold stocks fell on Tuesday, with the Market Vectors Gold Miners ETF (GDX) sliding $0.43, or 1.0%, to $43.82 per share.  The sell-off in gold stocks and the GDX coincided with a slight decline in COMEX gold futures, which inched lower by $3.40, or 0.2%, to $1,585.70 per ounce.  Gold stocks were also weighed down by moderate weakness in the broader equity markets, as the S&P 500 Index surrendered an earlier 0.9% gain to fall into negative territory by 0.3% at 1,347.89.

With today’s weakness in gold stocks, the GDX extended its loss in July to 2.1% and to 14.8% on a year-to-date basis.  The sector has continued to underperform the price of gold, which is down just by 0.7% this month and remains up by 1.5% in 2012.  On a longer-term basis, the difference is even more striking.  Over the past 24 months, the GDX is down by 13.2%, compared to a 31.0% advance for the yellow metal.

As gold stocks have continued to lag the price of gold, investors have begun to turn their attention to other commodity-related equities.  Platinum, which similar to gold provides a hedge against currency debasement, also tends to benefit from global economic growth.  With the price of platinum presently at $1,438 per ounce, its ratio relative to gold is near an all-time low – which has historically been followed by periods of platinum outperformance.

While the gold stocks sector provides investors with a wide variety of companies in which to invest, there exists only a small set of publicly-traded platinum stocks.  One such company, Platinum Group Metals (PTM.TSX, AMEX: PLG), has started to receive greater attention from the financial community after legendary investor George Soros purchased a sizeable position last year.

This morning, Platinum Group Metals announced that its Board of Directors has approved the adoption of a shareholder rights plan.  The emerging precious metals company noted that the plan is now effective and will require shareholder ratification within six months to remain in place.

Platinum Group Metals reported that the purpose of the plan is “is to provide shareholders and the Company’s Board of Directors with adequate time to consider and evaluate any unsolicited bid made for the Company, to provide the Board with adequate time to identify, develop and negotiate value-enhancing alternatives, if considered appropriate, to any such unsolicited bid, to encourage the fair treatment of shareholders in connection with any take-over bid for the Company and to ensure that any proposed transaction is in the best interests of the Company’s shareholders.”

The Company noted that the Board of Directors took several key developments into consideration when formulating the plan – including the approval of the Company’s Mining Right for the 74% owned WBJV Project 1 Platinum mine in South Africa, the impending Project 1 off-take and financing milestones for a $260 million project loan and the Company’s new Waterberg Platinum discovery.

Platinum Group Metals noted that the WBJV Project 1 Platinum Mine has significant value milestones expected in the near term – comprised of a $100 million Phase 1 construction program that is presently underway at Project 1 and a $260 million project finance loan is in the final steps for documentation and credit approval.  At Waterberg, the newly discovered multiple layers of thick, higher grade mineralization continue to be intersected in step out holes along strike, up dip and down dip. The Company is expecting an initial resource at Waterberg to be completed in the third quarter of this year.

In mid-day trading on Tuesday, notable gold stocks moving lower included GDX components Barrick Gold (ABX), Eldorado Gold (EGO), and Goldcorp (GG).  ABX dropped by 1.6% to $36.04, EGO by 2.2% to $11.84, and GG by 0.9% to $37.30 per share.