Goldman Cautious on Precious Metals (IAG) (KGC) (EGO)
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Price: $19.72 +8.41%
Rating Summary:
7 Buy, 6 Hold, 8 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 9 | New: 24
Rating Summary:
7 Buy, 6 Hold, 8 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 13 | Down: 9 | New: 24
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On Friday Goldman Sachs put out a note discussing the firm's cautious view on North American Precious Metals. Analysts think gold prices will average US$1,165/oz in 2014 and $1200/oz in 2015. Additionally, three mining stocks were rated Sell. These include IAMGOLD Corp. (NYSE: IAG), Kinross Gold Corporation (NYSE: KGC), and Eldorado Gold Corp. (NYSE: EGO).
"A less accommodative Fed, a recovery in US real interest rates and the continued liquidation of the physical ETF should outpace global central bank buying, providing headwinds for gold prices. Although the recent retracement in prices has fuelled a rebound in jewelry and physical demand, especially in EM, this is secondary in our view," said analyst Andrew Quail.
"Over the past decade gold equities have significantly underperformed the gold price, in our view mainly due to poor capital allocation. Using our commodity price deck most of our stocks do not produce adequate free cash flow to generate sufficient returns for investors, with an average CROCI of 6% vs. GS North America's coverage (ex-financials) of 13%," he added.
"A less accommodative Fed, a recovery in US real interest rates and the continued liquidation of the physical ETF should outpace global central bank buying, providing headwinds for gold prices. Although the recent retracement in prices has fuelled a rebound in jewelry and physical demand, especially in EM, this is secondary in our view," said analyst Andrew Quail.
"Over the past decade gold equities have significantly underperformed the gold price, in our view mainly due to poor capital allocation. Using our commodity price deck most of our stocks do not produce adequate free cash flow to generate sufficient returns for investors, with an average CROCI of 6% vs. GS North America's coverage (ex-financials) of 13%," he added.
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