This is some1 from JPMorgan, yes the same JP Morgan that indicated few ago gold at 1350 / 1100, which started the fall in gold and are causing people to lose their jobs in gold sector.... go figure.
J.P.Morgan Caznove’s Allan Cooke, Steve Shepherd and Abhishek Tiwari believe gold will average about $1,600 an ounce this year but should finish strong and trade near $1,700 by the end of year, where it will stay through 2014. Of course, that’s down from their previous forecast of $1,800 and ounce. In an environment where the SPDR Gold Shares (GLD) has dropped 13% during the past three months, that’s practically shouting from the rooftops.
“The gold price corrected sharply in April and is seen supported by retail and central bank demand, ongoing monetary stimulus in the US, Japan and Europe and ultra low interest rates in the developed world,” the three analysts write.
A gold recovery would surely boost gold miners, who have been hammered by worries that the price of gold would fall below their costs. The Market Vectors Gold Miners ETF (GDX), for instance, has dropped 38% this year.
But South African miners have their own issue, Cooke, Shepherd and Tiwari say:
We remain concerned SA gold share ratings may languish despite our undemanding valuations since catalysts appear negative to us in the near term. The local labour climate remains troubled with wage negotiations set to begin in June. They will be difficult given the unfortunate precedents set last year in the platinum industry and ongoing, bitter union rivalry. The pullback in the gold price hasn’t helped ratings and gold shares have, unsurprisingly, sold off sharply. This is an opportunity to buy selectively, in our view.
Their favorites include Gold Fields (GFI), which is the least exposed to South Africa, , and Sibanye Gold (SBGL), which has nothing but South Africa exposure yet has been beaten down enough to warrant an upgrade to Outperform from Neutral.
They also like Randgold Resources (GOLD) and Istanbul-listed Koza Gold. “These stocks are defensive by dint of their relatively high free cash flow margins and strong growth prospects, in our view,” Cooke, Shepherd and Tiwari say. “We expect our gold share picks to outperform gold/ETF (+15%) on a 12m view.”
Gold Fields has gained 1.2% to $6.81 today, after dropping 37% through May 7, while Randgold has risen 1.9% to $79.62 today, after dropping 21%. Sibanye, which was spun out of Gold Fields earlier this year, has surged 7.9% to $3.81 today, after plunging 36% during the past month.
