Gold Equities Should Reward the Patient

Source:

Scotia Capital analyst Trevor Turnbull believes the price of gold will be in the range of US$700 to US$900 per ounce in 2009, with an average price of US$825. While gold should hold steady, it may not be able to reach new highs. It is in this period of uncertainty and low gold equity valuations, that investors should assemble a solid gold portfolio...

While both gold and gold stocks have not experienced the same sort of declines base metals or oil producers have in the past few months, the price discrepancy between bullion and related equities persists. Gold is off 15% and the S&P/TSX Gold index has lost a third of its value in the past two months...

Scotia Capital analyst Trevor Turnbull remains bullish on gold, noting that dollar demand for the metal reached an all-time quarterly record of US$32 billion in the third quarter as investors flocked to safety. He also highlighted the identifiable investment demand gold offers, which includes ETFs, bars and coins.

Mine production, meanwhile, is expected to fall in 2009 as new projects are delayed and some older higher-cost operations will likely shut down as metal prices stay flat, Mr. Turnbull predicted. He also noted that central bank sales appear to be shrinking, while their purchases have started to rise.

As for the U.S. dollar, it has benefited since the credit crisis began as investors discard equities, commodities and other currencies in favour of cash and U.S. treasuries. When this trend reverses, it will be extremely positive for gold, the analyst told clients. However, he doesn’t see this happening for six to eight months...

Scotia believes the price of gold will be in the range of US$700 to US$900 per ounce in 2009, with an average price of US$825. While gold should hold steady, it may not be able to reach new highs. It is in this period of uncertainty and low gold equity valuations, that investors should assemble a solid gold portfolio, Mr. Turnbull said.

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe