Canadian gold stocks climb higher
Thursday, October 1, 1998
TORONTO, Oct 1 (Reuters) - Canadian gold stocks continued to climb on Thursday
as nervous investors rushed to hold gold bullion as a safe haven against falling equity
markets and a softer U.S. dollar.
Gold and precious minerals stocks had gained an average 4.2 percent on the
Toronto Stock Exchange, Canada's most important stock market, by late afternoon on
Thursday, helping to sustain a 62-percent rally during the past month.
The uncertain direction of the U.S. dollar, the recent safe haven of choice for skittish
investors, once again boosted confidence in gold. Gold bullion touched a high of
$301.10 an ounce on Thursday before profit-taking pushed it back to $299.60 an
ounce.
The U.S currency fell this week after the U.S. Federal Reserve cut interest rates by
25 basis points, prompting a flow of cash out of U.S.-dollar denominated securities.
Sour international equity markets also prompted buying of gold.
In North America, the Dow Jones Industrial Average tumbled 187.44 points to
7655.18 in late afternoon trading, while the benchmark TSE 300 index fell 147.62 to
5466.50 points.
"The softness we have had in the U.S. dollar is a main change of events over the last
month and the stock market is in such disarray that we're getting a bit of an uptick in
gold as a counter to it," said Manford Mallory, analyst with Research Capital Corp. in
Toronto.
Firmer bullion prices have helped to offset a miserable summer for gold producers
and investors alike.
Gold, a traditional hedge against international crises, had not benefited from months
of financial turmoil in Asia and Russia despite fears the contagion could sweep through
Latin American and eventually hit the U.S. economy.
Mallory said he expected Canadian gold stocks could continue to benefit from
uncertainty in equity markets, though he said it would be difficult to sustain bullion
much above the psychologically important $300-an-ounce level.
Mid-sized gold producers, such as Kinross Gold Corp. and TVX Gold Inc. , were
the big winners among Canadian gold companies. Gold and precious minerals account
for 5 percent of the TSE 300.
Toronto-based gold producer Kinross rose C$0.54 to C$5.15 a share, or 11.7
percent, while TVX climbed C$0.34 to C$4.36 a share, or 8.5 percent.
Some analysts, however, warned the current bullishness toward gold might be
premature. Canada's gold stock index has only gained about 4 percent since the
beginning of the year and remains 40 percent lower than its 1997 high.
($1=$1.55 Canadian) |
