Attractive valuations and strong balance sheets make gold miners a sector that will benefit from higher gold prices, according to strategists at DBS Bank.
“The three factors which are biased against gold prices are in the process of reversing – US bond yields have retreated, the US dollar has weakened, and the US employment outlook has faltered. Even as gold underperformed last quarter, we believe the price can resume its upward trend towards the USD2,000 level. This comes from the positive view on demand change, which is derived from central banks and discretionary spending.”
“Gold mining securities should benefit from higher demand and gold prices. We believe it will be a production growth story this year for miners. Miners should be able to maintain all-in costs with higher production volume despite threats from higher operating costs such as wages and fuel prices.”
“Gold mining companies are still generating good cashflows, which could enable them to embark them on growth/reinvestment cycles. Balance sheets are well managed after correcting mistakes seen in earlier years of overpaying for M&As.”
