Gold Shares Climb, Eye Best Week Since May

The gold sector continued its recent stretch of gains on Thursday, as the AMEX Gold Bugs Index (HUI) climbed 1.4% to 426.28.  With today’s rally, the HUI extended its weekly advance to 4.7% – its best such stretch since a 7.9% surge between May 21-25 of this year.

Gold shares outperformed the yellow metal today, as COMEX gold futures – per the December contract – settled up by $4.20, or 0.3%, at $1,620.20 per ounce.  The sector was not deterred by a rebound in the U.S. Dollar Index, which rose 0.3% to 82.607.

The most notable gold miner in the news on Thursday was Kinross Gold (K.TSX, NYSE: KGC), which reported adjusted earnings per share of $0.14 – below the $0.18 consensus estimate among Wall Street analysts.  The Canadian-based gold miner also lowered its full-year production forecast to 2.5-2.6 million ounces from 2.6-2.8 million, and raised its cash costs guidance to $690-$725 per ounce from $670-$715.  In addition, Kinross provided an update on its Tasiast project, which will now include a smaller mill and lower throughput.

Following the disappointing results, analysts at TD Securities and Dundee Securities lowered their price targets on Kinross.  TD analyst Greg Barnes reduced his target from $10.00 to $9.00, but maintained a Hold rating.  Dundee analyst Ron Stewart cut his target to C$9.50 from C$10.00, but maintained a Neutral rating.

Both analysts argued that while the earnings report contained a considerable amount of bad news, the large majority of it is already reflected in the share price of KGC – which recently sunk to its lowest level since late 2005.  Today, KGC managed to rally alongside its peers, by 2.9% to $8.06 per share.

Other gold stocks finishing higher included Eldorado Gold (EGO), Harmony Gold (HMY), and Randgold Resources (GOLD).  EGO rose by 1.9% to $11.34, HMY by 2.6% to $10.14, and GOLD by 3.8% to $98.28 per share.