TD Securities sees more glitter in precious metals stocks thanks to the latest round of stimulus by central banks too boost their struggling economies.
The U.S. Federal Reserve Board last week announced an open-ended bond purchase program, or quantitative easing (QE), in addition to guiding for zero interest rates until mid-2015. The European Central Bank had already announced unlimited bond-buying, while Bank of Japan this week pledged to increase its asset purchase program by a further $127-billion.
"The fact that the programs in the United States and Europe are open-ended...leave the door open for gold to move higher in the face of increased liquidity and rising inflation concerns," TD Securities analyst Greg Barnes said in a report. "We believe that a higher gold price is indirectly one of the objectives of Fed chairman Ben Bernanke's open-ended QE. A higher gold price suggests a weaker dollar and increasing inflation, both of which are needed to spur U.S. economic growth and reduce its debt levels."
TD raised its forecast for gold to average $1,690 (U.S.) an ounce this year; $1,900 in 2013 and $1,800 in 2014. For silver, the forecast is $31.08 an ounce for this year; $36 in 2013 and $32 in 2014.
Since the start of September, the gold price has risen 5 per cent, while the S&P/TSX Gold Index (in U.S. dollars) has climbed 14 per cent, Mr. Barnes said. "We believe that the outperformance by the gold equities over the past month reflects two things. Gold equities were oversold in our view, and investors are beginning to believe that the capital expenditure and operational expenditure inflation that has dogged the producers for the past three years is starting to moderate."
The TD team upgraded shares of Kinross Gold Corp. and Semafo Inc. to a "buy" with 12-month target prices of $13.50 and $6.00 a share, respectively. Among the producers, its top picks along with new target prices are as follows: Eldorado Gold Corp. ($20 a share); Goldcorp Inc. ($60); Yamana Gold Inc. ($25); B2 Gold Corp. ($6) and Alamos Gold Inc. ($26). Among the juniors, the team likes Continental Gold Ltd. ($12) and Rubicon Minerals Corp. ($5).
The office property pipeline is "larger than ever," and the Allied Properties real estate investment trust's "current portfolio contains many assets in which value can be boosted through repositioning, redevelopment or expansion," said Canaccord Genuity analyst Mark Rothschild.
Upside: The analyst, who maintains a "hold" rating, raised his one-year target to $33.60 (Canadian) a share from $31.
Shares of the pipeline company Enbridge Inc. are flat year-to-date, but "we believe Enbridge should be able to sustain its strong near-term growth through 2012 and 2013," said Desjardins Securities analyst Pierre Lacroix. Historically, the stock has had strong performance in the fourth quarter.
Upside: The analyst maintains his "buy" rating and one-year target of $43 a share.
BMO Nesbitt analyst Fadi Chamoun reduced his target on U.S. railroad Norfolk Southern Corp. after it lowered third-quarter earnings guidance due to lower shipments of coal and merchandise, and lower revenue from fuel charges.
Downside: The analyst, who maintains his "outperform" rating, cut his one-year target to $80 (U.S.) a share from $85.
Canaccord Genuity analyst Laura Champine cut her price target after retailer Bed Bath & Beyond Inc. missed expectations for the second quarter. The company faced higher payroll, occupancy and advertising expenses as the Cost Plus acquisition was integrated into the mix, she said.
Downside: She lowered her one-year target to $73 a share from $75, but maintained her "buy" rating.