Cara's Commentary

[10:17am ET] Now that the psychologically important $1,000 level for the price of gold has been achieved and considered by Wall Street analysts to be sustainable, I am expecting an increase in analyst upgrades. The reason is simple: their models will use the $1,000 price as a basis for valuation. Not only does that increase the value of existing reserves, it increases the reserve quantity because of the use of a higher cut-off grade. Double positive.

This morning, Credit Suisse made such a change:

• We are now using $1,000/oz gold for target price and rating valuation: We are moving to our Q4/10 and 2011FY price forecast of $1000/oz gold basis for our valuation from Q4/09 and 2010FY forecast of $960/oz, previously. We also apply current pricing of 60:1 silver to gold ratio, and are now moving to 2010 CS forecasts of $2.90/lb copper and $0.85/lb zinc (from 2009 official CS forecasts) to arrive at our current targets. We apply our target P/NAV multiples to a NAV generated by using the metal price forecasts set out above in our models in Q4/09 and beyond. Additionally, we have made some revisions to our target price-to-net-asset-value (P/NAV) multiples to reflect the expansion in multiples over the past 6 months.

• As a result of these revisions we are upgrading Northgate Explorations (AMEX:NXG and TSX:NGX) and Eldorado Gold (NYSE:EGO and TSX:ELD) to Outperform from Neutral.

• We continue to be bullish on our gold price outlook: We believe the gold price will continue its upward trend in 2010, remaining within sights of $1,100/oz territory with upward pressure on the price of gold being driven by weakness of the US dollar, continued worries of a recession and inflation as investors seek gold as a safe-haven via ETF and retail demand.

• Additionally, mine supply continues to decline with many producers failing to meet production forecasts. High scrap levels and muted jewellery demand are expected to be offset by low Central Bank sales and expected reductions in the global hedgebook, thanks to Barrick Gold (ABX).

On Friday, our models churned out Sell signals on a related group of stocks – the oils, steels and base metals, but not the goldminers, which in fact were looking just the opposite. Because of the gold and silver miners looking to me like they have another short-term buy cycle before the intermediate-term trend changes for the commodity-price sensitives, I decided to hold the status quo with the oils, steels and base metals.

This afternoon or tomorrow, I might change my mind, so do your own analysis.