Analysts Bullish on Gold Price and Strongly Managed Juniors


"Less gold is coming to market, while demand is growing. That can only mean one thing."

A strong gold price has revived interest in Canada's junior gold miners, and while many remain strapped for cash, a few are set to outpace the pack.

The juniors most likely to outperform are the ones with capable management, the ability to raise funds and that have high-potential projects close to production.

"It's good to have a pretty deep team that has experience on the operating side of things and experience in putting assets into production," said M Partners analyst Tara Hassan.

"But it also helps if they have experience with the capital markets and understand the intricacies of dealing with the market."

The positive outlook for juniors assumes that the price of gold remains strong.

Although trading near record levels, the price of gold has been unable to hold above the $1,000 per ounce barrier that it crossed briefly in February. Spot gold was about $940 an ounce on Friday.

Wellington West analyst Paolo Lostritto sees a slight correction in the price of gold this summer, before a new rally toward the end of this year.

"When I look at macro indicators this market makes me nervous. I think we've had a good run in the juniors here and it's probably wise to take some money off the table in the event that there is a pull-back," he said.

"At the same time, there are some good (junior) names out there that have good value. If we see a correction they are likely going to suffer nonetheless."

But Lostritto remains bullish on the price of gold and gold equities over the long term—a sentiment shared by most analysts.

"The most important driver for gold is the expectation that the trillions of dollars in bailouts that are being created in Washington will lead to a much lower U.S. dollar, which means a much higher gold price," said John Ing, president of Toronto investment dealer Maison Placements.

"Less gold is coming to market, while demand is growing. That can only mean one thing. The price of gold will go higher."

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