Why gold equities are worth a second glance

ON GOLD

In the last few years, the price of gold has risen strongly, moving from just under $1,000 per ounce at the beginning of 2009, to over $1,800 in mid-2011.

While the price of gold bullion has subsequently given back some of those gains, it remains at relatively attractive levels. Looking to the gold equity markets, however, we see a different return profile. The rapid moves up in the gold price have not been reflected in the performance of the gold miners; indeed the performance has materially dislocated in the past six months. Investors would be right to question why – particularly with cash-flush balance sheets and steadily increasing dividend payouts that some companies are paying courtesy of the strong gold price. We believe rec...