[miningmx.com] — AS gold continued to trade at new record levels on Wednesday, some analysts have tipped sceptical investors to ditch physical gold for equities.
The metal hit a fresh record high on Wednesday, riding on dollar weakness and market anticipation of more quantitative easing from the US Federal Reserve.
Spot gold rose as high as $1 344.10 per ounce earlier in the day before easing to $1 342.05, extending a price rally of more than 22% so far this year.
However, Peter Major, a senior portfolio manager at Cadiz Corporate Solutions, said if there ever was a time to invest in gold shares, it was now. Most gold-orientated companies continue to trade at approximately the same levels as before the recent rally.
“Gold has been running too far ahead of equities. I don’t think it’s going to keep going any higher,” said Major.
“Gold equities have done badly against the commodity, but it’s still cheaper to invest in the shares because the prices have remained constant and will have better value.”
While the stronger rand may have taken some value from gold equities, the long-term view is that companies continue to benefit from the buoyant underlying gold price, with a possible larger upside than the commodity itself, said Major.
RMB Asset Management fund manager Wayne McCurry was more cautious, however.
“It’s fine if you think gold prices will drive up equities, but I’d much rather invest in the commodity just as a hedge,” he said.
“Our local industry is very consolidated, so I don’t see where any growth would come from in any of the gold companies.”
Major was particularly upbeat on the prospects of HARMONY GOLD MINING COMPANY LIMITED.
“Harmony’s share price is still relatively cheap and its assets offer full benefits,” he said.
“The company stands to get a bigger kick when the rand weakens against the dollar, and when its projects in Papua New Guinea will offer full benefits.”
