The time to buy gold shares as a shelter from the stock-market storm has passed, says Daniel McConvey, an analyst at Goldman, Sachs & Co.
McConvey on Wednesday said he sees little chance the metal -- a traditional investment haven -- will extend this year's 17 percent rally. He cut ratings on mining companies AngloGold Ltd, Barrick Gold Corp and Newcrest Mining Ltd. Their shares have surged 90 percent, 46 percent and 91 percent, respectively, this year.
"We believe that gold will be more challenged to rise substantially," McConvey wrote in a note to clients. Investors who have loaded up on the stocks "should take some profits."
PHOTO: BLOOMBERG
McConvey, who was controller of operations for Barrick before becoming a precious metals analyst eight years ago, lowered AngloGold and Barrick to "market performer" from "market outperformer" and Newcrest to "market outperformer" from "trading buy." The Standard & Poor's 500 Index's gold index has surged 44 percent this year, its best-performing group, amid concerns of more terrorist attacks in the US and mounting tension in the Middle East and South Asia.
Gold rose US$1.30 to US$326.80 an ounce on the New York Mercantile Exchange, a 4 1/2-year high.
Investors agreed the stocks may be overpriced.
"Gold is a hedge against disorder and the fear of it," said Jean-Marie Eveillard, who manages US$2.5 billion in First Eagle SoGen funds and owns shares of AngloGold and Barrick. "But the metal is more attractive than the mining stocks. They are extraordinarily expensive."
The Amex Gold Bugs Index of 12 mining stocks sells for 299 times expected earnings. That compares with a price-to-earnings ratio of 21 for the S&P 500.
Gold stocks' gains also tend to be fleeting, investors said.
"Gold stocks and gold in general benefit from uncertainty, especially political unrest," said Gene Pisasale, senior portfolio manager at Wilmington Trust, which manages US$27 billion in Wilmington, Delaware. "The next time we hear of a truce in the Middle East or [US Secretary of State Colin] Powell going to Pakistan, the stocks can come down 20 percent in a day."
Even as McConvey reduced his recommendation on the shares, he boosted his estimate on where the shares would trade over the next 12 months.
He raised his target on AngloGold to US$36 a share from US$29, to US$25 from US$22 on Barrick, the world's second-largest gold producer, and to A$9 from A$8 on Newcrest.
AngloGold's US shares slid US$1.17 to US$33.12, while Barrick lost US$0.88 to US$22.43. Melbourne, Australia-based Newcrest Mining rose A$0.25 to A$8.15.
Some investors said they were puzzled by McConvey's new price targets.
"How can the analyst become more negative in his recommendation at the same time he raises the target price?" asked Eveillard.
An investor who followed McConvey's recommendation to `"take some profits" by selling shares now would miss out on gains if his price targets prove accurate.
Goldman spokesman Ed Canaday said the downgrades should be considered in a shorter time frame than the 12-month price targets.
Of the 24 analysts tracked by Bloomberg covering Barrick, 18 rate it "buy," while six, including McConvey, rate it "hold." Seven rate AngloGold a "buy," 10 deem it a "hold" and two recommended selling the shares. Eleven of 14 analysts rate Newcrest "buy," while two rate it "hold" and one calls it a "sell." Continued low interest rates -- the benchmark Fed Funds rate is at a four-decade low of 1.75 percent -- may drive gold prices higher, McConvey said, as could "global political and economic uncertainty."
Also, if stocks extend their decline, gold stocks could do better as an alternative to other equities.
The weakening dollar also boosted demand for gold by making the dollar-priced metal cheaper for buyers using other currencies.
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
Taiwan was ranked the fourth-safest country in the world with a score of 82.9, trailing only Andorra, the United Arab Emirates and Qatar in Numbeo’s Safety Index by Country report. Taiwan’s score improved by 0.1 points compared with last year’s mid-year report, which had Taiwan fourth with a score of 82.8. However, both scores were lower than in last year’s first review, when Taiwan scored 83.3, and are a long way from when Taiwan was named the second-safest country in the world in 2021, scoring 84.8. Taiwan ranked higher than Singapore in ninth with a score of 77.4 and Japan in 10th with
SECURITY RISK: If there is a conflict between China and Taiwan, ‘there would likely be significant consequences to global economic and security interests,’ it said China remains the top military and cyber threat to the US and continues to make progress on capabilities to seize Taiwan, a report by US intelligence agencies said on Tuesday. The report provides an overview of the “collective insights” of top US intelligence agencies about the security threats to the US posed by foreign nations and criminal organizations. In its Annual Threat Assessment, the agencies divided threats facing the US into two broad categories, “nonstate transnational criminals and terrorists” and “major state actors,” with China, Russia, Iran and North Korea named. Of those countries, “China presents the most comprehensive and robust military threat
RSS