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Molten gold. Montreal-based gold miner Semafo Inc. has declared its first dividend on rising output in its West Africa operations.

Petr Josek/Reuters/Petr Josek/Reuters

Bullion's bear-market decline has made gold bugs very quiet these days, but it has emboldened the naysayers.

Nouriel Roubini, the well-known forecaster and economics professor at New York University, recently said that gold was headed to $1,000 (U.S.) an ounce by 2015 – adding to the misery of anyone who had loaded up on the precious metal in the hope of avoiding oncoming hyper-inflation and the collapse of the U.S. dollar.

Now, Peter Ward, an equity analyst at Jefferies, has cut his price target to $1,250 from $1,500, and believes the risk in the new target is to the downside. On Tuesday, it fell to $1,241 an ounce, down $14.

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"Gold has declined by 37 per cent from its highs in 2011," Mr. Ward said in a note. "Therefore, we believe the myth that gold is a low risk 'store of value' has been exposed for what it is to the latest generation of investors."

For all his skepticism, though, his main target is gold mining companies – which is quite something given that the NYSE Arca Gold Bugs index has fallen more than 50 per cent this year. He suspects that the price of gold will fall below the cost of production for mining firms, meaning that if you're tempted to scoop up gold stocks on the cheap as gold falls out of favour, don't.

He argues that while gold stocks are down sharply, valuations are actually higher when you factor in current gold prices.

"Some will say this is natural for equities at a cyclical low," he said. "However, we aren't so sure the challenges facing gold and the gold industry are merely cyclical."

As well, gold miners benefited in earlier years of the gold bull market when they unwound hedged positions on the price of gold, or reduced a short-position from 2002 to 2011.

"This represented a put option for gold investors that no longer exists," he said. "The short position of the mining companies was effectively covered in 2011. And, in our opinion, it is not entirely a coincidence that 2011 was the year gold hit its all-time high."

He cut his recommendation on Barrick Gold Corp. to "hold" from "buy" and lowered his price target to $14 from $30. He also cut his recommendations on Goldcorp Inc., Kinross Gold Corp. and Newmont Mining Corp. to "underperform" from "hold."

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