UBS Analyst Raises Gold Stocks' Price Targets on Higher Gold Price Forecasts

Despite expectations that prices for both gold and silver will be lower in 2009 than they are this year, UBS has upgraded its forecasts for several metals through 2010.

The Swiss financial services firm now expects gold will average $895, $800 and $730 per ounce in 2008, 2009 and 2010, up from $850, $750 and US$720, respectively. Its palladium forecasts climb 24% to $460, 96% to $550 and 81% to $625 per ounce for those years.

UBS feels a firming of the U.S. dollar, inflation fears subsiding in developed markets and risk in general being lower in 2009 will all contribute to lower price for gold and silver.

As a result of its new projections, earnings per share estimates for precious metals stocks in its coverage universe climb 16%, 22% and 8% from 2008 to 2010. This produces average price target increases of 8%, but Agnico-Eagle Mines Ltd. (AEM) and Kinross Gold Corp. (KGC) have been downgraded to “neutral” from “buy” due to their share price gains. However, their target prices rise to $85 from $78 per share and to $26 from $24, respectively.

The following names continue to be rated “buy” at UBS and each have higher price targets: Barrick Gold Corp. (ABX) ($57), Centerra Gold Inc. (CAGDF.PK) (C$10.50), Franco-Nevada Corp. [FNV.TO](C$26.50), Goldcorp Inc. (GG)($53.50), Newmont Mining Corp. (NEM)($64) and Silver Wheaton Corp. (SLW)(C$18.50).