By WENDY STUECK
MINING REPORTER
Friday, December 20, 2002
– Page B12
VANCOUVER -- Gold continued its charge yesterday, with spot prices climbing to $355 (U.S.) an ounce in chaotic overnight trading in European markets and closing yesterday at $345.90 on the New York Mercantile Exchange.
Gold, traditionally viewed as a haven in troubled times, has been on the rise in recent weeks, hitting five-year highs last week and climbing yesterday to levels that even the most bullish commentators had not expected to see until next year.
As bullion prices advanced yesterday, some gold company shares were beaten down by apparent profit-taking, a development that some analysts saw as evidence that the current rally may be short-lived.
"Everybody thinks the party's over, if you look at the shares," said Douglas Pollitt, an analyst with Toronto investment dealer Pollitt & Co. "The metal is still strong, but when it comes to the shares, the agnostics are calling it a day."
The nine stocks that comprise the S&P/TSX Canadian gold index put in a mixed performance yesterday, with four posting an increase and five showing a decline. The biggest loser was Goldcorp Inc.,which fell $1.08 or 5.29 per cent to close at $19.32. (Canadian).
Many gold stocks have been on a tear in recent weeks, and some analysts said the current gold price is already built into their values.
Four of the five top performers on the Toronto Stock Exchange this year have been gold companies: Bema Gold Corp., up 320 per cent; TVX Gold Inc., up 242.46 per cent; Kinross Gold Corp., up 205.88 per cent; and Glamis Gold Ltd., up 196.88. (The other one is oil and gas company Niko Resources Ltd.)
Mr. Pollitt said yesterday's frenzied gold buying likely included purchases by some funds or investors who had gone short on the metal and are now scrambling to cover their losses. "One way or another, there have been short positions built up. And there is no more aggressive buyer than a short coverer," he said.
Analysts said the price of gold could continue to climb as the threat of war with Iraq continues and investors stew over the conflict's impact on oil prices and other aspects of the economy.
Gold prices have risen about 23 per cent this year.
"It's a tough market to call -- it's very volatile," said George Parrill, a director of ScotiaMocatta, the precious metals trading arm of Bank of Nova Scotia.
Mr. Parrill said war jitters and a weakened U.S. dollar were both influencing gold prices, but he speculated that the market could pause before the end of the year.
"I would think with prices at $350 [U.S.] and above, we could see the market take a breather around this level."
Mr. Parrill added that there are a number of speculators in the market that have long positions. If they choose to cash out and take profits, he said, that could put downward pressure on prices.
Even if gold prices keep rising, it could be difficult for investors to pick a winner among gold producers, Mr. Pollitt said.
Five years of dreadful gold prices have eroded the asset base, he said. "We are going to see falling production, costs are going to go up, you add to that the ubiquity of hedge books, and stock picking is not going to be as straightforward as throwing darts at the sector," he said.
A number of gold producers are reducing their hedge positions, and unhedged producers' stock prices have outperformed their hedged counterparts this year.
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