Gold Stocks Get Price Hikes as Bullion Surges

With gold quickly approaching the $900 per ounce mark, analysts are racing to keep pace with both the metal and the soaring shares of miners. On Wednesday, Raymond James hiked its forecast for bullion to $903 from $750 in 2008, to $880 from $770 in 2009, and to $750 from $675, thereafter.

Silver got a similar treatment with the firm raising its average price target for 2008 by $1.50 to $15, by $2.50 to $14.50 in 2009, and by $1 to $13, long term.

“We believe that 2008 continues to be a volatile year for gold based on its late 2007 activity and early start to 2008 with increased sensitivity to geopolitical tensions (Pakistan, Iran) and fear of record oil prices (resulting in inflationary pressures for the average consumer and more specifically, cost pressures for producers),” analyst Paul O’Brien wrote in a note to clients.

After gaining 14.5% in the third quarter of 2007, gold surged another 12.1% in the fourth quarter, averaging $789 per ounce, he added. The weakening U.S. dollar, rate cuts by the Federal Reserve, record levels of investment demand as measured by the streetTRACKS Gold Trust (GLD), and carry over credit, liquidity and housing concerns in the U.S. were all cited as drivers of strength for gold and related equities.

Given Raymond James’ updated forecasts, the firm’s ratings and target prices on several stocks has been adjusted.

Mr. O’Brien’s new price target on Agnico-Eagle Mines Ltd. (AEM) shares is C$65 compared to C$55 previously, while his rating moves to “market perform” from “outperform.” Alamos Gold Inc. (AGIGF.PK)got a C$1 target boost to C$7.50, and was upgraded to “outperform.”

Anatolia Minerals Development Ltd.’s [ANO/TSX] target climbs C$0.75 to C$7.75 and continues to be rated “outperform,” as does Western Goldfields Inc.[WGI/TSX], which got a C$1 target boost to C$5.25.

The analyst’s target price for European Goldfields Ltd. [EGU/TSX] again climbed C$1 to C$9.50, and it was upgraded to a “strong buy.” Goldcorp Inc.’s (GG) new target is C$44, up from C$36 previously, and has been upgraded to “outperform,” as was Intrepid Mines Ltd., which got a C$0.05 target boost to C$0.40.

Finally, Yamana Gold Inc.’s (AUY) target climbs by C$4 to C$20 per share, and was upgraded to “strong buy.”

Comments

[kkin365:]

Given that there are but few stocks focusing on gold, does GLD make sense? I read that since GLD's model is to buy the underlying metal as its stocks are sold, there is an intrinsic advantage on the upside (more buyers of the ETF, more buying of the metal, creating more demand for it) as well as on the downside, which could be more sudden and more dramatic. Any comments?

2008 Jan 13 11:31 AM