GOLD EQUITIES DOMINATE RECOVERY
Warm bullion, hot stocks
Twenty of the hottest, of 236 listed gold stocks, the world's top performing equities subsector.
Author: Barry Sergeant
Posted:Wednesday,21 Jan 2009
JOHANNESBURG -
Asglobal equity and credit markets continue to squirm along through astubbornly sticky quagmire, listed gold stocks continue to dominate thefront line of recovery in no small way. The MSCI Barra Dollar Index for global equities - of all kinds - currently trades some 55% off its highs, seen in October 2007.
A large count of listed gold stocks - 236 around the world - havealso fallen by around 55% from highs, measured on a fully weightedaverage basis. The stock price highs were recorded in or around March2008, when the dollar gold price made all time records at just above $1000 an ounce. But then the contrast: where the MSCI Barra Dollar Indexfor world equities has only risen 8% from its lows, seen in November2008, gold stocks have risen, or "bounced" by a rather huge 93% fromtrough prices, seen around the end of October 2008.
At this point, the global capitalisation, or market value, of listedgold stocks runs up to a total of nearly $200bn, compared to a high ofaround $420bn in March 2008. While this contraction of value cannot beunderstated, gold stocks currently rank as the best performing equitiessub-sector in the world, followed by listed silver stocks, and thenlisted uranium stocks.
Many thousands, if not millions, of words have been written aboutthe positioning of gold in a soured world economy, be it as the "antidollar", as an alternative monetary instrument, as a safe haven forincreasingly disenchanted investors, or as a hedge against inflation,but the one cold fact is that dollar gold bullion ranks as the "leastunderperforming" of major traded commodities. It currently tradesaround 15% below its highs, compared to losses of 50% and more for eachof the base metals, platinum, palladium, and all the elements in theenergy sector; uranium, however, is showing signs of coming back. Mostsoft commodities have also crashed in price.
Within the universe of listed gold stocks, meteoric rises have beenrecorded by certain individual stocks. Where all listed gold stockshave bounced by an average of 93% from trough prices, the top 20 haveorbited upwards by a weighted average of nearly 170%. As may beexpected, smaller stocks lead the charge: Azteca Gold, La Mancha Resources, and Tanami Gold, three stock names that have literally gone into orbit.
Azteca is focused in Idaho, Nevada, Alaska, and Mexico; La Manchaoperates three gold mines, with production distributed between Africaand Australia, and is actively developing an advanced project inAustralia, while Australia's Tanami ranks as some kind of a miraclerecovery stock, back, as it were, from a point of no return.
But among the hottest gold stocks may also be found a number of far bigger Tier II names, in the form ofEldorado, Red Back, JSC Polymetal, and Centerra, with the latter two ranking as recovery stocks. There are also Tier III names Western Goldfields, and Novagold, with the latter also ranking as a recovery stock.
While a good number of these high rising gold stocks may be twosmall, or too risky, or both, for big institutional money, the leadingTier I gold equities performance league is always there, led by Kinross, and followed - some distance behind - by Newcrest(a big Australian name), Barrick(the world's biggest gold miner, by ounces and value), and Lihir(another Australian name).