Gold plunge knocks 2.7 percent off TSX as miners take hit

Mon Apr 15, 2013 4:55pm EDT
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By Alastair Sharp

TORONTO (Reuters) - Shares of Canada's biggest gold miners plunged on Monday, dragging the country's main stock index to a five-month low as weaker-than-expected Chinese data prompted investors to beat a wholesale retreat from bullion and a string of commodities.

The resource-rich index fell 2.7 percent, its sharpest selloff since June last year, to close at its lowest level since Nov 16.

Barrick Gold Corp (ABX.TO: Quote), the world's biggest producer of gold, plunged 11.5 percent to C$20.30 as the precious metal headed for perhaps a record single-day loss of more than $100 an ounce. <GOL/>

Other major producers also fell sharply, with Goldcorp Inc (G.TO: Quote) down 5.6 percent to C$28.38 and Kinross Gold Corp (K.TO: Quote) losing 13.6 percent to C$5.54.

"Gold has completely lost its value in terms of the stock prices of gold companies," said Barry Schwartz, portfolio manager at Baskin Financial Services. "Gold companies used to trade for two or three times net asset value. Those days are gone."

And with supply and demand fundamentals unlikely to support bullion in the same way they would support a commodity with industrial uses, another asset manager said the metal's price could fall by another $250 to around $1,100 an ounce, the average incremental cost to get it out of the ground.

"Gold is all about animal spirits," said John Stephenson, a senior vice president at First Asset Investment Management. "You can't put a price on it."

With resource stocks making up around 40 percent of the weight of the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE, the index took the commodity price swoon harder than most, although U.S. indices were also sharply lower. .N   Continued...

People walk by a sign displaying TSX information in Toronto, August 17, 2009. REUTERS/Mark Blinch