GOLD PRICE NEWS – The gold price fell $14.43, or 0.9%, to
$1,597.65 per ounce Thursday morning amid further sovereign debt
concerns in Europe. The price of gold
turned lower alongside the euro currency, which dropped 1.0% to 1.2811
against the U.S. dollar – its lowest level since September 2011.
Escalating euro zone worries overshadowed two better than expected
reports on the U.S. labor market, as weekly jobless claims and the ADP
employment report came in ahead of the consensus estimate among
economists.On Wednesday the gold price advanced $8.21, or 0.5%, to $1,612.08 per ounce, marking its fourth straight trading day of gains. The spot price of gold initially dipped below $1,600 per ounce, but later rebounded alongside the broader financial markets. Coupled with Tuesday’s $38 climb, the gold price is now higher by 3.1% this year and on pace for its best week since late November.
In contrast to the gold price, yesterday silver gave back
a portion of Tuesday’s 6.4% surge higher. On Wednesday gold’s sister
precious metal slipped $0.46, or 1.6%, to $29.24 per ounce as traders
booked profits following the metal’s best day in over three years. The
iShares Silver Trust (SLV), a proxy for the price of silver and the
sector’s largest ETF, finished lower by $0.44 at $28.39 per share.
Despite
yesterday’s gold price strength, gold stocks ended the day near the
flatline. The Market Vectors Gold Miners ETF (GDX) rallied as much as
1.4% in morning trading but settled lower by $0.06 at $53.74 per share.
Alternatively, the broader equity markets – as measured by the S&P
500 Index – initially retreated 0.7% but later bounced back to near
unchanged at 1,277.30. The markets’ rebound coincided with a modest
decline in investor risk aversion, as the CBOE Volatility Index (VIX)
fell 3.3% to 22.22.
Many large-, mid- and small-cap gold stocks
were in the news yesterday after analysts at Macquarie lowered their
price targets on a host of companies in the sector. The firm attributed
the reductions to expectations for a sequential decline in quarterly
earnings given the 3.7% gold price decline in the fourth quarter of
2011. Notable shares whose targets were cut included Goldcorp
(G.TSX), IAMGOLD (IMG.TSX), and Allied Nevada Gold (ANV.TSX). G.TSX
was reduced to C$62.00 from C$71.00, IMG.TSX to C$24.00 from C$27.00,
and ANV.TSX to C$38.00 from C$49.00 per share. However, the firm
maintained an Outperform rating on each company.
While Macquarie
discussed several near-term headwinds for the sector, it reiterated its
longer-term bullish outlook for the gold price and the shares of gold
producers. The firm’s favorable stance was based in large part on the
expectation that negative real interest rates will remain in place for
the foreseeable future. Additionally, Macquarie noted that the firm’s
precious metals strategist, Stephen Harris, is forecasting a 2012
average gold price of $2,006 per ounce.
“Gold prices have been
driven by the outlook for US real short-term rates,” Macquarie wrote in a
report to clients. “Gold has historically gained nearly 25% when real
US rates have been below zero. With policy rates at zero and
substantial slack remaining in the US economy…real US rates are likely
to remain negative for the next several years. Market conviction in
that view may increase in early 2012 if the Fed moves, as we expect, to
tie future rate policy directly to an unemployment rate target.”
Given
its positive longer-term gold price forecast, Macquarie highlighted
Barrick Gold (ABX.TSX) and Kinross Gold (K.TSX) as its “Top Picks” in
the sector. The firm issued a price target of C$73.00 and C$19.50 on
ABX.TSX and K.TSX, respectively, with an Outperform rating.
Among
mid-tier producers, the firm most preferred AuRico Gold (AUQ.TSX) and
B2Gold (BTO.TSX). AUQ.TSX and BTO.TSX were each rated Outperform by
Macquarie, with price targets of C$12.50 and C$5.50, respectively.
By jturbin
January 5, 2012 9:29 AM EST
