Citigroup Forecasts $950 Gold and a Strong Rebound 4Q in Metal Prices, Mining Equities

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"Our commodity team forecasts very bullish 2009+ commodity prices that drive very strong earnings growth for the stocks, and consequentially, very attractive PE multiples and discounts to valuation that look very appealing," Citigroup's Australian metal analysts, Wilkins and Hope stressed.

Citigroup's Australian metal analysts Tuesday urged investors and mining companies to look through the current "haze of negativity" and expect to "see a strong rebound" in metals prices and mining stock in the fourth-quarter 2008 and 2009.

"A friendless mining sector is in need of a lifeline having pulled back 25% from the May peak, Citigroup analysts Clarke Wilkins and Matthew Hope admitted, adding that global growth is "undeniably slowing."

Noting that the gold price is only down 7% in Australian dollar terms, the analysts declared, "We remain bullish on gold with a 2009 price forecast of US$950/oz driven by a return of fabrication demand after the price correction, wealth effects in developing nations and negative real interest rates."

Meanwhile, the analysts advised that "the underlying driver of commodity intensive infrastructure investment in developing countries remains unchanged. Short-term risks remain, but the opportunities are there for investors/corporates that can look through the haze of negativity."..

"Our commodity team forecasts very bullish 2009+ commodity prices that drive very strong earnings growth for the stocks, and consequentially, very attractive PE multiples and discounts to valuation that look very appealing," Wilkins and Hope stressed.

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