The flood of bad news that is sinking the rest of the mining sector is providing an unexpected lift for Canadian gold producers.
Barrick Gold Corp. shares have jumped 20 per cent in the first few days of 2016. Goldcorp Inc. stock has climbed 12 per cent while shares of Agnico Eagle Mines Ltd. have surged 16 per cent.
Gold is traditionally billed as a haven for nervous investors and gold-mining stocks have shot up in tandem with worry about China’s sputtering economy, Middle Eastern tensions and North Korea’s nuclear bomb test.
In addition, some observers believe gold will move into a supply deficit beginning this year. After seven years in which global mine production ramped steadily upward, the world’s output of mined gold may begin to gradually fall back in 2016.
A Credit Suisse report in December predicted that mine output will shrink by about 4 per cent a year until 2018. Analysts Anita Soni and Robert Reynolds said the declining supply would help gold reach $1,150 (U.S.) an ounce this year. It rose to around $1,109 an ounce on Thursday.
To be sure, any prolonged ascent in gold prices still faces major hurdles. The U.S. Federal Reserve began raising its key interest rate last month after years of keeping it at near-zero levels.
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