Poised for a ‘gut check’, gold’s bull run is not over yet: Canaccord Genuity – by Peter Koven (Financial Post – July 13, 2016)


This has been an incredible year for gold equities, with shares of most miners doubling or tripling off their lows in January. But if analysts at Canaccord Genuity Group Inc. are right, there is more upside to come.

Analysts Tony Lesiak, Rahul Paul and Peter Bures hiked their price targets on 27 precious metals stocks on Tuesday, with the large-cap producers being raised by an average of 25 per cent each. For example, they increased their target on Barrick Gold Corp.’s shares by 27 per cent (to $33), and on Kinross Gold Corp.’s shares by 26 per cent (to $9.75).

The analysts expect gold and silver prices to move higher, but just as important, they think valuation multiples across the sector are poised to increase. They noted that valuations appear “stretched” after this year’s run-up, but that the current environment of negative global interest rates is a “unique” one that justifies higher multiples.

“While we aren’t changing how we value the equities we cover, we are moving to the upper end of the valuation range we have seen over the past 10 years given the potential for gold equities to benefit further from a declining cost of capital,” they said in a note.

But in the short term, Canaccord actually expects a pullback. Portfolio strategist Martin Roberge noted gold stocks have outperformed the broader S&P/TSX Composite Index by 71 per cent this year. While that doesn’t mean the bull market is over, that kind of run is usually followed by a “higher-risk” phase, he wrote.

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