Gold Gains Traction (GLD, GDX, IAG, NEM, ABX)

Analysts at Thomas Weisel Partners Group Inc. (NASDAQ: TWPG) have released a report on the gold mining companies. Gold ended the year at $1097/oz. The price of gold exhibited strength from August to early December 2009.

According to analysts, the key events for the increase in gold price were the Fed’s quantitative easing announcement in mid-March, China’s announcement of increased gold reserves in April, and India’s purchase of IMF gold in October. Analysts believe that the positive trend in gold prices will continue with ongoing concerns about fiscal and monetary policies.

The SPDR Gold Trust (ETF) (NYSE: GLD) was trading at $109.86 and the Market Vectors Gold Miners (ETF) (NYSE: GDX) was trading at $47.83. The 52 week range for the SPDR Gold Trust (ETF) has been between $78.87-$119.54, whereas the 52-week range for the Market Vectors Gold Miners (ETF) has been between $27.15-$55.40.

The share price performance among gold producers year-over-year was mixed according to the report. According to analysts, year-end shares outstanding will increase 10% for gold producers primarily due to equity raisings. According to analysts net debt is expected to fall 16%. Among the developers there has been an increasing reliance on project financing.

According to the report the seniors have been able to borrow at corporate level. P/NAV multiples at spot gold continued to contract according to the report from 1.40x to 1.16x. The trend reflects the acceptance of higher gold prices, widening operating margins, equity dilution and declining exploration success. Analysts at Thomas Weisel have an Overweight rating for IAMGOLD Corporation (NYSE: IAG) and Newmont Mining Corporation (NYSE: NEM) and Market weight rating for Barrick Gold Corporation (NYSE: ABX).