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The Gold Mining Bloodbath Keeps Getting Worse

This article is more than 8 years old.

In the aftermath of the financial crisis, some investors saw gold—and by extension gold mining companies—as a smart place to be amid global markets that seemed unstable and characterized by government intervention and mountains of debt.

Since 2011, however, gold has consistently sunk and gold mining companies have tumbled even more. The fall has been brutal and on Monday it reached yet another new low point. The Market Vectors Gold Miners ETF, which tracks an index of gold mining companies, fell by 10.6% on Monday and is now down 25% in 2015. By contrast gold, which dropped by 2.6% on Monday to $1102 per ounce, is down about 7% in 2015.

Gold hit its peak in 2011, when it briefly traded for $1900 an ounce. Since then it has tumbled by 42%. But the Market Vectors Gold Mining ETF has tumbled by 79% since its 2011 top.

The Market Vectors Gold Miners ETF. Credit: Ycharts.

Gold mining companies have been killed because they raised tens of billions of dollars in debt and equity when the gold price was soaring to build and expand iffy new projects that make little sense today. The carnage, which has gone on for years, has hit both big and small gold mining companies.

For example, shares of Barrick Gold, the world’s biggest gold mining company, fell by 15.7% on Monday and are now down 31% in 2015. Barrick’s stock is down about 60% in the last two years. Another large gold miner, Goldcorp, saw its stock fall by 12.2% on Monday, leaving the stock down 30% this year. At the same time, shares of a tiny gold mining company like NovaGold fell by 9.7% on Monday and are now down by nearly 9% in 2015.

Gold mining companies have managed to underperform gold itself in both good markets and bad. The gold mining companies are well on their way to underperforming gold for the 10th time in the last 14 years. Basically, gold miners have been the worst investment out there in recent years.