Canaccord Raise Target by 18% After “strong” start to 2023, analysts at Canaccord Genuity remain bullish on gold and gold equities “with the Fed tightening cycle nearing its end and inflation rates falling.”
“At the same time, banking issues continue to simmer with banks sitting on more than $600 billion in unrealized losses on securities and deposits continuing to fall (down $979 billion as of last week),” said Dalton Baretto, Carey MacRury and Michael Fairbairn. “That said, there is a considerable gap between the Fed’s and the market’s expectations on the future path of interest rates. If the Fed decides to take or sustain a hawkish path, we see potential near-term downside for gold and more of a hard landing scenario. We expect a hard landing scenario to result a full 180 move from the Fed and ultimately with upside for gold. The recent FOMC minutes indicated that the Fed staff now project a mild recession starting later this year and noted that ‘historical recessions related to financial market problems tend to be more severe and persistent than average recessions.’ Gold can sell off in a broader risk-off environment as seen in March 2020 and October/November 2008, but such moves tend to be short-lived, and we note gold is usually one of the earliest asset classes to respond to a shift to monetary easing.”
With gold up 22 per cent since September lows and gold equities higher by an average of 48 per cent during that period, Canaccord said 31 of the 40 producers and royalty companies in its coverage universe have outperformed the gold price with more than half by 20 per cent or more.
After further increases to its commodity price deck, including a new long-term gold price (US$2,262 per ounce from US$2,048), the analysts made further target price increases to stocks.
By asset class, their top picks are:
Senior producers
* Agnico Eagle Mines Ltd. ( “buy”) with a $99 target, up from $84. Average: $69.45.
Analysts: “Agnico Eagle is one of our top picks among the senior gold producers for investors looking for large-cap gold exposure with relatively low geopolitical risk. The company has a track record of consistent operating performance, a solid balance sheet, and a history of growing profitable production in lower-risk jurisdictions, all of which we believe have been strengthened with the Kirkland Lake Gold merger last year. We expect future growth will come from resource expansion and utilization of excess mill capacity at Malartic, finalizing expansion plans at Detour, a potential Hope Bay reboot, and the San Nicolas JV. In our view, Agnico’s shares are attractive at current prices.”