CHICAGO, March 28, 2011 /PRNewswire/ -- Today, Zacks
Equity Research discusses the Metals & Mining Industry,
including Barrick Gold Corporation (NYSE: ABX),
Agnico-Eagle (NYSE: AEM), Goldcorp Inc. (NYSE: GG),
Newmont Mining (NYSE: NEM) and Kinross Gold
Corporation (NYSE: KGC).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
A synopsis of today's Industry Outlook is presented below. The
full article can be read at
http://www.zacks.com/stock/news/49939/Metals+%26amp%3B+Mining+Industry+Outlook+-+March+2011
As per the World Gold Council, gold prices rose for the tenth
consecutive year in 2010, ascribed to recovery in key sectors of
demand and continued global economic uncertainty. In 2010, gold
prices jumped 29%, reaching $1,405
per ounce as of December's end.
During 2010, the price of gold rose to record levels on several
occasions, trading as high as $1,420
per ounce. Gold's performance was strong and volatility remained
low. The World Gold Council suggests that the increase was not only
driven by driven by inflationary forces but was also inflated as
both the private and public sectors of India and China rushed into the gold market.
Gold demand went up 9% over 2009, showcasing a 10-year high of
3,912.2 tons, driven by the rise in jewelry demand, the revival of
the Indian market and strong momentum in Chinese gold demand.
Moreover, central banks became net purchasers of gold for the first
time in 21 years, hiking the demand for the yellow metal.
Major demand came from India
and China. India bought 746 tons, a 69% increase over
2009, and China bought 400 tons of
gold of jewelry. China bought
179.9 tons of gold in the form of bars and coin, a 70% increase
over 2009.
Gold remained a coveted asset given its long-term supply and
demand dynamics and influenced by macro-economic factors. Concerns
regarding economic growth in developed countries made gold an
attractive and safe investment option. The European sovereign debt
crisis made European investors use gold as a currency hedge.
Pressure on the US dollar against various currencies coupled with
higher inflation expectations in many countries, including
India and China, also pushed up gold prices.
The value and wealth preservation attributes of gold continue to
attract investors and consumers. Jewelry and investment demand in
non-Western markets continues to rebound while industrial demand
has started to recover in response to an improvement in economic
conditions. India, which alone
consumes nearly 45%−50% of the world gold production, should drive
demand for gold along with China.
Chinese gold demand is expected to double in 10 years.
Even though gold price dropped 7% in January this year, it again
recorded a rise in February. We believe gold demand and prices will
strengthen in 2011. As China and
India continue to grow rapidly,
their demand for gold will also rise in tandem.
Higher prices bode well for gold producers, which should benefit
giants such as Barrick Gold Corporation (NYSE: ABX),
Agnico-Eagle (NYSE: AEM) and Goldcorp Inc. (NYSE:
GG). However, gold producers like Newmont Mining (NYSE: NEM)
and Kinross Gold Corporation (NYSE: KGC) suffer from lower
ore grades that subdue production levels, increase mining costs and
offset the benefits of rising gold prices.
Overall, the stock prices of gold producers are not expected to
benefit much from this favorable commodity-price backdrop. This is
reflected in our overall long-term neutral view on the space. As
major economies continue to recover, investors' confidence will be
restored to invest in stock markets, which could cause gold prices
to fall. However this is not going to happen in the near future. We
have a Zacks #3 Rank (Hold) on Barrick
Gold, Agnico-Eagle, Goldcorp and Kinross Gold Corporation.
However, Newmont Mining has a Zacks #4 Rank (Sell).
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