Gold equities have been on an incredible run to date in 2016 amid the rally in prices. Analysts at BMO Capital Markets think it is now time to take a few profits from the table, as the second quarter is a seasonally weak period for gold.
“We expect precious metals equities to outperform within the next 12 months, but anticipate a near-term correction perhaps providing better opportunities to buy within the next 3 months,” i was told that inside a note.
Back when gold prices were slumping, the BMO analysts urged investors to pay attention to large producers which have high-quality assets, strong balance sheets and good management teams. They are considered the most “defensive” names in the sector. Now that prices are much stronger, they believe investors should consider some higher-risk stocks that provide better upside.
“These less defensive names tend to be smaller producers that often have superior growth profiles to the larger producers, which lead these businesses to deliver better leverage to higher metals prices,” i was told that.
Their top chioces among the mid-tier producers are Alamos Gold Inc. and Endeavour Mining Corp.
The analysts raised their gold price assumptions because of ongoing economic uncertainty. They hiked their target for 2016 by 12 per cent (to US$1,175 an oz), and raised their 2017 target by nine percent (to US$1,200). Additionally, they predicted gold will bottom at US$1,150 an ounce, up from their prior forecast of US$1,000.
