Newspaper article The Evening Standard (London, England)

Miners Are in a Hole as Price of Gold Loses Its Lustre with Fall below $1000; MARKET ROUND-UP

Newspaper article The Evening Standard (London, England)

Miners Are in a Hole as Price of Gold Loses Its Lustre with Fall below $1000; MARKET ROUND-UP

Article excerpt

Byline: Mickey Clark

Mining shares were in disarray today after the price of gold dipped back below the $1000 an ounce level for the first time in almost a week after the international Monetary Fund threatened to sell 10% of its reserves.

gold reached $1023.85 on Thursday, its highest level since March last year, when it struck a record $1030.80 on worries about the sustainability of the global economic recovery.

Traders say investors have rushed to take profits in the belief that now might be the time to cash in.

instead, brokers turned their attention to other metals. goldman Sachs says higher copper, zinc and other byproduct prices increase the attractions of miners such as Antofagasta, down 51/2p at 760p. it has also added the shares to its buy list.

But it has removed Vedanta Resources, down 67p at 1941p, from that list because the increased Asarco bid price means debt will rise faster than it had previously expected.

Kazakhmys, 43p cheaper at 1081p, remains on its mining Conviction Buy list, and further rises to the broker's copper price forecasts for 2010 and subsequent years increases its attractions. goldman's 12-month price target increases to 1734p, of which 420p reflects the value of Kazakhyms' stake in Eurasian Natural Resources (EnRC), 11p cheaper at 881p.

Meanwhile, Citigroup has raised EnRC to buy, but has dropped Kazakhmys to hold.

Oil shares fared little better with Macquarie bank talking the price of crude oil down to around $52 a barrel during the fourth quarter. That compares with a forecast of $85 a barrel from goldman Sachs, $62 from Merrill Lynch, $60 from Credit Suisse and $75 from Deutsche Bank.

Macquarie says the oil price has been driven higher by three factors: the stock market rally, dollar weakness and a resilient US driving season.

Macquarie says the US Labor Day weekend marks the end of the driving season, and demand for gasoline will now tail off before distillate demand picks up in the winter.

"Refiners will now have less need to produce gasoline, but distillate stocks, which are winter heating and industrial fuels, are 48% above the five-year average. …

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