Citigroup bucked the gloom surrounding gold miners today by proclaiming that the price had now “reached a more sustainable level.”
After two-years without a ‘Buy’ rating on a gold or silver miner, the broker has finally decided to give not just one the rating, but three.
Randgold (LON:RRS), Acacia (LON:ACA) and Fresnillo (LON:FRES) were the lucky recipients, with silver miner Hochschild (LON:HOC) upgraded to ‘Neutral’.
The four shares had not been rated ‘Buy’ by Citi for the past three years.
Acacia was the fastest to recognise and react to the end of the bull market, while Fresnillo has the benefit of owning the best landholdings in the industry, the broker said.
Meanwhile, Randgold is, in the broker’s view, the best-managed precious metals group it has under coverage, with longstanding chief executive Mark Bristow at the helm.
“Should gold slip further (a scenario we are not ruling out), they [the three miners] should be able to see out the tail-end of the gold bear market without too much difficulty and may even be able to take advantage of weakness elsewhere to consider corporate activity.”
Citi suggested that US$1,050 was a “fair long-term real price forecast for gold,” although it notes that a range of US$950-US$1,250 is realistic.
“We feel that gold has now reached a more sustainable level and that all of the above companies can cope adequately with the gold price at its recently much lower levels” the broker said.
Citi added “Timing the precise bottom is difficult but we believe that gold will bottom in the second half of 2015 and then see a rising profile for many years.”
It flies in the face of consensus, with analysts commenting earlier this week that the gold price could slide to US$800 by the end of next year.
Mining stocks have plummeted this week but Citigroup’s note helped stem the tide with Randgold, Acacia and Fresnillo all treading water around yesterday’s close.