Canadian gold stocks soar on record bullion prices
Thu Jan 3, 4:32 PM
ca.news.finance.yahoo.com
By Cameron French
TORONTO (Reuters) - Canadian gold stocks soared on Thursday, with top producers such as Barrick Gold and Kinross Gold setting all-time highs as bullion prices hit record levels.
Gold companies tracked by the TSX global gold index surged 3.5 percent, touching their highest levels since May 2006, as spot gold prices pushed as high as $869 an ounce, widening the margin between revenues and costs for miners.
The sector's gains follow a 7.6 percent rise on Wednesday, when gold pushed past its previous high of $850 set in 1980.
This week's rise follows a year in which gold stocks fell 5 percent, sharply underperforming a 31 percent jump in bullion prices, in part due to worries about rising input costs for miners, and also on skepticism about whether the metal's price could maintain its lofty levels.
But sentiment appears to be shifting, market watchers say.
Kerry Smith, an analyst at Haywood Securities, said speculative money had been largely active in other sectors such as uranium or chasing takeover premiums, but may now be coming back to the gold sector.
As well, costs of steel and some chemicals used by miners have steadied.
"I think we're getting to the point where the margins are starting to expand for these companies because the gold price is getting high enough and the cost pressures are starting to moderate somewhat," he said.
Barrick, the world's top gold producer, rose 5.8 percent to close at C$48.30 on the Toronto Stock Exchange on Thursday, while Kinross gained 3.3 percent to C$20.65.
Over the last three sessions, Barrick has risen 22 percent, adding more than C$7 billion to its market capitalization.
Other prominent Canadian players were also stronger, as Yamana Gold , which has built itself into a top mid-tier producer through acquisitions, climbed 7.2 percent to C$14.73, while Goldcorp gained 3.2 percent to C$37.50.
The sector's top percentage gainer was NovaGold Resources , which benefited both from the higher prices and a U.S. court ruling that will allow a subsidiary to proceed with two open-pit mines near Nome, Alaska.
NovaGold jumped 16.2 percent, to C$10.33.
PRICES DRIVEN BY WORRIES
Analysts said gold prices were being helped by safe-haven investment flows, as higher oil prices sparked fears of higher inflation and slower U.S. growth.
John Ing, president of Maison Placements, said the push above the $850 level has likely made stock investors more confident in continued strength in gold prices.
He said he expects the price to hit $1,000 an ounce in the intermediate term, and sees a return of the past thinking on gold investment -- that a bet on gold stocks should produce a better return than the bullion itself.
"I expect that, this year, that the gold stocks will in fact resume their traditional outperforming of bullion," he said.
($1=$0.99 Canadian)
(Reporting by Cameron French; Editing by Rob Wilson) |
