rbc capital markets predicts gold will rally above $1,000, but more importantly that gold stocks are trading as though gold were $650-750, so the mining shares have even more room to improve.
Gold expected to rally above $1000 in Q1 2009
Nine of the last 13 interest rate-cutting cycles by the U.S. Federal Reserve occurred during recessions, and in two-thirds of them both gold and gold equities clearly outperformed, according to RBC Capital Markets.
While gold prices may demonstrate seasonal weakness in October and November, RBC analysts suggest aggressive fiscal and monetary policies of central banks around the world will likely push gold higher. This is a result of both the elevated financial risk and possibility of higher inflation.
The firm recommends investors buy gold stocks at current levels and forecasts that bullion will rally above US$1000 per ounce in the first quarter of 2009.
RBC said gold equities appear to be discounting a long-term gold price in the range of US$650-US$750, with large-cap names at the higher end. Its Tier I and Tier II global gold stocks have target price returns of 62% and 104%, respectively.
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