Broker snap: Gold stocks fall as Nomura cuts price forecasts

7th Mar 2013 16:27

The gold sector was under pressure on Thursday after Nomura cut its near-term gold price forecasts and said that downside risks to equity prices are still 'substantial'.In a review of the sector, Nomura said: "For the first time since 2008, in our view, the investment environment for gold is deteriorating as economic recovery, rising interest rates and still benign Western inflation (for now) will likely leave some investors rethinking their cumulative USD 240bn investment in gold over the past four years."Changes to central-bank stimulus measures will add volatility to precious metals prices, and while Nomura expects stronger gold-price environments to emerge, in the near term, the broker said it would be prudent to lower estimated prices and earnings forecasts for producers.Over the coming months, gold prices are expected to trade around the $1,500-an-ounce level but risks are to the downside "if disinvestment does not reverse quickly", Nomura said. The broker said that over $5.8bn has come out of gold ETFs in the past three weeks alone.The 2013 gold-price forecast has been cut from $1,981/oz to $1,602/oz and the 2014 estimate has been reduced from $1,800/oz to $1,750/oz. The 2015 forecast remains at $1,600/oz."In theory, this gold sell-off should create a buying opportunity in the equities, but the risks to the downside still outweigh the upside, in our view."Nomura has downgraded Polymetal from 'buy' to 'neutral' after a period of outperformance (based on valuation). The broker said that Randgold, rated 'reduce', is moving closer to fair value but still trades at a premium multiple.Meanwhile, African Barrick Gold (previously 'neutral') and Petropavlovsk (previously 'buy') have both been downgraded to 'reduce'.Centamin, however, is the only 'buy'-rated stock in the sector. The broker said that the market is pricing too much of a risk premium into the stock at the moment.