STOCKWATCH: Australian gold mine shares sharply higher on gold price rise
Source: AFX
Publication date: 2001-05-21
SYDNEY (AFX) - Australian gold mining shares were sharply higher on the increase of the gold price to an 11-month high of 296 usd per ounce earlier today, dealers said.
At 1:00 pm, Delta Gold was up 0.15 aud or 10.42 pct at 1.59, Normandy Mining was up 0.06 or 5.08 pct at 1.24, Sons of Gwalia was up 0.24 or 2.47 pct at 9.95, Newcrest Mining was up 0.24 at 4.70 and Goldfields was up 0.19 aud or 11.11 pct at 1.90.
The S&P/ASX 200 was up 33.9 points at 3,438.0.
A dealer with Macquarie Equities said the strong gold price follows a steady rise over the past seven weeks from a low of 256.60 usd on April 2.
The main drivers of the increase are structural changes to the lending market, tight supply and inflation fears, he said.
"Australian gold equities are fundamentally undervalued, trading on low price to earnings multiples and single-digit cash flow multiples. Earnings will be boosted by strong metal prices and a weak Australian dollar," he said.
"The recent rally in offshore gold stocks is flowing through to Australian stocks, which have been aided by the recent run in cyclical and headline resource stocks," he added.
An analyst with a European brokerage said the surge in gold prices is due more to technical reasons than the fundamentals of the gold market.
He said the price may have risen sharply as one fund suddenly decided to buy a substantial amount of gold, triggering stop loss buying over the weekend and a similar reaction in Asia today as people cover short positions in the forward market.
He said the supply and demand picture of the gold market has not changed and it is therefore questionable whether gold prices could maintain their current levels.
The analyst expects gold prices to see support at 270 usd per ounce in the next few months and does not plan to change recommendations for Australian gold miners based on the surge of gold prices in the past three days. |
