While the share prices of mining's diversified majors have been strengthening over the past three months, highlighting more positive investor sentiment about the sector’s outlook, the one-year view (see today's Global Leaders table) underscores the extent of the longer-term divergence between golds and diversifieds.

Other gold stocks among the industry heavyweights that were among the top-50 positive movers in the past week included Randgold (up 5.3%), Agnico-Eagle (5.7%), AngloGold Ashanti (4.9%), Kinross Gold (12.8%), Polymetal (2.4%), Yamana (16%), Tahoe Resources (13.8%) and Gold Fields (3.9%).

RBC Capital Market said on the weekend it expected average gold prices to trend 9% higher to $1,250/oz this year before improving a further 8% in 2017 to average to $1,300/oz. “There are a number of positive demand catalysts, including steady fundamental demand from China and India, systematic central bank purchases, and US inflows into the physical gold ETFs,” the bank said.

“We expect gold equities to continue to lead the direction of the commodity in 2016 and recommend that investors look for pullbacks in trading ranges to add to core gold/silver equity holdings. Near term we could see a pullback in May-June, during a period of seasonal weakness for physical gold and gold and silver equities.

“We would use any share price weakness as a buying opportunity ahead of seasonal strength in August-September.” RBC said the March-quarter gold sector equities rally favoured large-cap North American Tier I producers and out-of-favour South African miners. If the metal price continued to perform positively, “we would expect some of the Tier II and III names with greater operating leverage could begin to outperform”.

In Australia, RBC likes Silver Lake Resources and Gold Road Resources, while of the London-listed stocks it’s AngloGold Ashanti and silver producer Hochschild. In North America upside sits with Kinross, Agnico Eagle, Silver Wheaton, Detour Gold, Klondex, Guyana Goldfields, Osisko Gold Royalties and Franco Nevada, according to RBC.

Meanwhile, Morgan Stanley says key risks to “gold’s relatively high price” include a significant improvement in economic activity in the major economies, particularly China, the US and Germany.

“Watch for hedging,” the investment bank says.
“If gold miners adopt a policy to protect revenues by hedging production … because they expect prices to decline, this could restrict the upside to the gold price.”(Mining Journal, Tables Editorial)