By Leo Larkin
Standard & Poor's is still positive on selected gold stocks despite their recent drop. The price of the precious metal is holding at a critical technical juncture. A drop below $273 per ounce could trigger sell stops and cause gold to test its August 1999 low of $252. But we at S&P think a prolonged decline is unlikely because the current price is some $87 per ounce below the cost for producers to replace reserves.
Fundamentals for gold mining stocks -- and the metal itself -- are positive on weak financial markets, a deficit in supply relative to demand, and industry consolidation. The current environment of low inflation is already "old news" to investors.
S&P has 4-STAR (accumulate) rankings on Barrick Gold (ABX ) and Newmont Mining (NEM ). Homestake Mining (HM ) and Placer Dome (PDG ) are ranked 3 STARS (hold).
Larkin is an equity analyst covering gold mining stocks for Standard & Poor's