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Higher gold and silver prices still to come: Canaccord

With gold closing above $1,500 (U.S.) per ounce for the first time today, can $1,600 - the next target for those that like nice round numbers - be far behind?

Canaccord Genuity thinks it'll get there without a lot of sweat. It raised its "peak gold price" forecast today to $1,600, up $100, while hiking silver to $47.50 from $30. It also boosted its 2011 average gold and silver price forecast to $1,525 and $42, respectively.

"We continue to believe that macroeconomic conditions continue to favour higher gold and silver prices, including record global liquidity, inflation prospects and low real interest rates, currency debasement on sovereign debt woes and political unrest in the Middle East and North Africa," said Canaccord analyst Steven Butler.

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The revised forecasts may seem relatively conservative next to some of the other predictions that have surfaced recently. But the action did spark a number of price target hikes for companies on the Canaccord radar screen, providing investors with their view on what equities have in store in the rising price environment.

Among the revisions:

Canaco Resources Inc. was raised to $8 from $7.75.

Carpathian Gold Inc. went to $1.15 from $1.10.

Grayd Resources Corp. was raised to $3 from $2.80.

International Tower Hill Mines Ltd. went to $13 from $12.30.

Kimber Resources Inc. was raised to $3.15 from $2.65.

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Minera Andes Inc. went to $4.35 from $3.70.

North Country Gold Corp. went to $2.70 from $2.30.

Orezone Gold Corp. went to $7.50 from $7.25.

Union Pacific Corp. reported first-quarter earnings slightly below Street forecasts, but TD Newcrest analyst Cherilyn Radbourne isn't discouraged. She believes the transporter will see its growth in volumes become more apparent towards the end of the year.

Upside: TD Newcrest raised its price target by $2 to $117 (U.S.)

Pinecrest Energy Inc. has released impressive well results and its first capital budget, buoying Canaccord Genuity analyst Brian Kristjansen's view of the stock. The company's production is expected to be nearly 2,500 barrels of oil equivalent by the end of April, significantly ahead of his expectations, and it plans to spend $105-million drilling about 26 wells in 2011.

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Upside: Mr. Kristjansen reiterated his "top pick" status and raised his price target to $7.15 from $4.

Canaccord Genuity analyst Phil Skolnick remains skeptical that Encana Corp. will increase its weighting toward liquids and oil materially within the next couple of years. The company this week said it was now diverting time and money toward more lucrative products such as crude oil and natural gas liquids to compensate for the weak gas market. But "the company stated to us to not expect a change to the production mix (currently 96 per cent natural gas) until 2013 plus," Mr. Skolnick said. "Consequently, we do not see this as a near-term transformational story that investors need to rush into."

Upside: Canaccord maintained its "hold" rating and $35 (U.S.) price target.

Domtar Corp. trades at an inexpensive valuation, has revitalized its balance sheet and should see strong operating results in 2011, with nearly $700-million in free cash generation, said Raymond James Ltd. analyst Daryl Swetlishoff. He's also encouraged by continued tight white paper markets and suggests "Domtar shares should be bought."

Upside: Mr. Swetlishoff raised his price target by $5 to $120 (U.S.).

TD Newcrest has raised its forecasts for Canadian and U.S. drilling rig activity as stronger oil prices have provided producers with more cash flow. Meanwhile, the trend to drill deeper wells is expected to continue. This will drive increased revenue and operating margins for Precision Drilling Corp. , but margins should stay well below industry peaks and the stock price is already reflecting a lot of these benefits, said TD Newcrest analyst Roger Serin.

Upside: Mr. Serin raised his price target by $2.50 to $15 but downgraded the stock to a "hold" from a "buy".


Follow Darcy Keith on Twitter for more of the latest analyst actions from the Street and exclusive investing news from The Globe and Mail.

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Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More

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