After ending 2013 down 28% – the biggest annual loss since 1981 – the price of gold lifted from below US$1,200 per ounce to US$1,237 per ounce in the first week of 2014 giving hope to investors that the metal may recover some of its allure in 2014.
The price rise helped to give shares in Australia's largest gold miner Newcrest Mining (ASX: NCM) an extra shunt upwards from the low of $7.16 seen at the start of December. Newcrest shares have rallied 21% in the last month closing last week at $8.67.
Many of the other listed gold miners have had sharp lifts in the last month. Silver Lake Resources (ASX: SLR) has had a huge run, climbing 86% from its low of $0.37 to $0.69. It would almost look like a success story in isolation, but still a long way from the price it was a year ago of $3.23, and many investors will still be hurting.
Northern Star Resources (ASX: NST) and Regis Resources Limited (ASX: RRL) have also performed well in the last month, up 32% and 12% respectively.
With signs of life coming back to the gold miners, is the worst now over? Possibly. It is likely that some of the investor panic seen late last year has now subsided as the shock of 2013's falling gold price wears off and the world adjusts to the new outlook for gold.
The expectation for a cooler Aussie dollar against a strong U.S. dollar in 2014 is also favourable and will help Aussie gold producers hold margins in the short term. Lower trading volumes over the New Year's period could also be a factor in ratcheting up prices.
For Newcrest though it will still be a tough year ahead. Ongoing cost pressures and the announcement that shareholders are taking legal action over an analyst briefing held prior to the company's June revelation of $5 billion to $6 billion in writedowns, suggests there will be more volatility to come.
Foolish takeaway
The rally in gold mining shares indicates that some of the panic felt in 2013 has eased as investors start warming to gold again. The year ahead will likely see continued volatility and with problems still knocking on its door, Newcrest Mining will be no exception.
