Market Overview

Gold Short Sellers Seek Direction (AU, NEM, NGD)

The price of gold bottomed in October below $1,270 only to rebound late in the month to more than $1,350. Short sellers seemed to be looking for direction, as the swings in short interest were mixed.

The number of shares sold short in AngloGold Ashanti (NYSE: AU) and Newmont Mining (NYSE: NEM) fell more than 18 percent between the October 15 and October 31 settlement dates, while short interest in New Gold (NYSE: NGD) rose about 16 percent.

Agnico Eagle Mines (NYSE: AEM), Barrick Gold (NYSE: ABX), IAMGOLD (NYSE: IAG), Kinross Gold (NYSE: KGC), Randgold Resources (NASDAQ: GOLD) and Yamana Gold (NYSE: AUY) also saw their short interest decline.

Short interest in Eldorado Gold (NYSE: EGO), GoldCorp (NYSE: GG), Gold Fields (NYSE: GFI), Harmony Gold Mining (NYSE: HMY) and Royal Gold (NASDAQ: RGLD) also grew somewhat during the period.

Furthermore, the number of shares sold short in silver companies Coeur Mining (NYSE: CDE), Hecla Mining (NYSE: HL) and Silver Wheaton (NYSE: SLW) shrank during the period.

But short interest in First Majestic Silver (NYSE: AG) and Pan American Silver (NASDAQ: PAAS) swelled somewhat.

See also: Short Sellers Yield On Best Buy

Below is a quick look at how AngloGold Ashanti, New Gold and Newmont Mining have fared and what analysts expect from them.

AngloGold Ashanti

This South African gold producer saw short interest fall almost 19 percent to the lowest level since mid-June. The 7.63 million shares or so at the end of October was well short of the more than 12 million shares sold short back in August. Days to cover fell to about two in the period.

AngloGold Ashanti recently reported strong third-quarter results due in part to cost cutting. The company currently has a market capitalization of around $6 billion and a dividend yield near 1.6 percent. But the long-term earnings per share (EPS) growth forecast is less than seven percent.

Only one of the five analysts who follow the stock and were surveyed by Thomson/First Call recommends buying shares. The mean price target, or where analysts expect the share price to go, implies upside potential of about 12 percent. Note though that their target is much less than the 52-week high.

AngloGold Ashanti's share price has risen about 14 percent in the past month and is now about 16 percent lower than six months ago. In that time, the stock has underperformed larger competitor Barrick Gold and the broader markets.

New Gold

Short interest in this Vancouver-based miner increased about 16 percent during the final two weeks of the month to more than 8.26 million shares, or less than two percent of the float. That was on top of a more than six percent rise in the number of shares sold short in the previous period. Days to cover was about two.

New Gold fell short of consensus expectations for the third quarter. The company has a market cap of more than $2 billion, but it does not offer a dividend. New Gold's return on equity is less than eight percent, but its operating margin is in line with the industry average.

Ten of the 13 surveyed analysts recommend buying shares. They feel the stock has some room to run, as their mean price target is more than 37 percent higher than the current share price. However, that consensus target is much less than the 52-week high reached back in January.

Shares recently reached a new multiyear low after falling more than 49 percent since the beginning of the year. The share price is up about four percent in the past week. Over the past six months, the stock has underperformed AngloGold Ashanti and Barrick Gold, as well as the broader markets.

See also: Short Interest Rises In Marvell, Falls In Qualcomm

Newmont Mining

This Colorado-based producer of gold and copper saw short interest shrink more than 21 percent to more than 24.30 million shares. The number of shares sold short has been on the decline since the end of August and is more than two percent of the float. The days to cover is less than two.

Better-than-expected costs resulted in better-than-expected third-quarter earnings for Newmont. The company now has a market capitalization of about $14 billion and a dividend yield near 2.9 percent. The operating margin is better than the industry average, but the return on equity is in the red.

For at least three months, the consensus recommendation of the analysts polled has been to hold shares. Yet the mean price target, or where analysts expect the share price to go, suggests more than 12 percent potential upside. However, their target is much less than the 52-week high here too.

The share price is up about six percent in the past month, though it reached a multiyear low in mid-October. The stock's performance has been in line with competitors GoldCorp and AngloGold Ashanti over the past six months, but it has underperformed the broader markets.

At the time of this writing, the author had no position in the mentioned equities.

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Posted-In: Agnico-Eagle Mines AngloGold Ashanti barrick gold coeur d'alene mines Eldorado Gold First Majestic Silver Gold Fields goldcorp Harmony Gold Mining hecla mining IAMGOLD kinross gold newmont mining pan american silver Randgold Resources Royal Gold silver wheaton yamana goldShort Ideas Trading Ideas Best of Benzinga

 

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