Broker snap: Nomura ups gold miners, but still negative on prices in 2014

5th Jul 2013 11:37

Nomura has upgraded its ratings for gold mining peers African Barrick Gold (ABG), Polymetal and Randgold Resources, saying it sees a short-term rebound in gold prices.The broker says that gold prices have reached an equilibrium stage of $1,230 an ounce and a potential rally to $1,500 should lift gold equities in the near term."Our analysis suggests that the market could be susceptible to a rebound as futures short positions have reached cyclical records. In addition, our analysis suggests that there has been a link between Chinese gold premiums and western ETF divestment, indicating that the market may have been misinterpreting the full reasons for the speed and extent of the gold liquidation. "Should this link hold, we expect that an eventual easing of tight financial conditions in China could see ETF liquidation slow, perhaps allowing western investors to reassess from the long side, augmenting any short-term gold price strength. "However, Nomura still remains bearish on gold prices from the fourth quarter through to 2014, estimated an equilibrium price of just $1,070 an ounce. The broker explains that new gold laws in India - "a once-key source of physical demand" - present a substantial barrier, while new mine supply of 200 tonnes is still expected to be delivered next year. Nomura has upgraded ABG from 'reduce' to 'buy' but slashed its target price from 200p to 155p. Polymetal has been lifted from 'neutral' to 'buy' (target price cut from 900p to 590p), while Randgold has been upped from 'reduce' to 'neutral' (target price cut from 4,650p to 4,370p). Centamin has been left at 'buy' but its target price has been reduced from 70p to 45p to reflect the broker's concerns over Egypt. Meanwhile, a 'reduce' rating has been maintained at "financially-constrained" Petropavlovsk (its target has been dropped from 125p to 55p).