Commodities & Metals

Gold Breakout Continues, Analyst Sees Gold Miners Winning

24/7 Wall St. has been covering this latest attempt by gold and gold-mining stocks to break out of their recent range. The logic and reasoning behind this move varies widely, but now we have a fundamental report from Sterne Agee covering the gold miners. Sterne Agee projects that gold and silver are fighting the consensus, and they are winning.

The firm’s Michael Dudas and Satyadeep Jain have four Buy ratings and three Neutral ratings highlighted in their call.

Wednesday’s report highlights Agnico Eagle Mines Ltd. (NYSE: AEM), Coeur Mining Inc. (NYSE: CDE), Gold Resource Corp. (NYSEMKT: GORO) and Newmont Mining Corp. (NYSE: NEM) as Buys. Hecla Mining Co. (NYSE: HL) is only rated as Neutral by the firm, but this stock is rising on the heels of its earnings and production report.

The Sterne Agee team said:

Increasingly mixed economic data, visible continuity from the Federal Reserve Board regarding an elongated zero interest rate policy (ZIRP), a reversing trend in the value of the dollar and supportive internal physical demand and investor interest should aid price trends. We are finding that miners are aggressively restructuring their businesses for a $1100-$1200 per ounce market, which should help provide added investor comfort and fuel for a valuation recovery among mining equities.

The team also points out that gold prices have risen 11% and silver prices have risen 14% since December’s taper announcement. At the same time, the U.S. dollar index has fallen 0.4%, while the broader U.S. equity markets have gained 2%. Another boost is from very positive physical demand, as well as macro trends supporting micro trends in gold.

Dudas and Jain also see a good base forming in gold, and in silver. Their gold price forecast remains positive. Over the next 12 months, they expect gold to average $1,300 per ounce, with upside to $1,450. They are targeting a low $20s average on silver, with a potential to reach upper $20s as supply and demand balances tighten and investor investment remains supportive. Target prices are listed in the call as well.

Agnico Eagle Mines Ltd. (NYSE: AEM) has a $38 price target, versus its $33.68 close. The consensus price target on Agnico Eagle shares is only $33.72.

Coeur Mining Inc. (NYSE: CDE) is one that may seem too good to be true, or at least incredibly bullish. Sterne Agee has a price target of $28, but the stock closed at $11.92, and its consensus price target is $11.97. We show that highest analyst target price as $18.00 in the Thomson Reuters universe, so it is possible that there is a typing error in the Sterne Agee report.

Gold Resource Corp (NYSEMKT: GORO) closed at $5.48, and the Sterne Agee price target is up at $10.00. This stock is tiny, and its 52-week trading range is $4.45 to $14.17.

Newmont Mining Corp. (NYSE: NEM) was given a $36 price target, versus its $24.21 closing price, and note that the consensus price target is $3.80.

Hecla Mining Co. (NYSE: HL) has a Neutral rating at Sterne Agee, but this one is rising on Wednesday after earnings and production numbers. Hecla’s consensus price target is $3.80 — at least it was before the earnings gains on Wednesday.

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