With gold clawing its way up towards US$1,200 an ounce it could be time for investors who like to allocate a portion of their portfolio to gold to once again take a close look at the sector.
It's certainly the view of major stock broking house UBS which according to a recent report in the Australian Financial Review has a 'buy' rating on all of the gold stocks under its coverage, with the exceptions of Newcrest Mining Limited (ASX: NCM) and Independence Group NL (ASX: IGO).
Weak Aussie dollar driving profit up for gold miners
Like a number of export-orientated ASX-listed stocks, the lower Australian currency is a positive for gold producers given that the precious commodity is priced in US dollars. So although the gold price hasn't performed all that well over the past few years in US dollar terms, in Australian dollar terms it has been a much better experience.
Despite the positive case for buying gold stocks in a general sense, the largest ASX-listed gold producer Newcrest may not be the best way to 'play' the sector.
According to UBS, Newcrest did not buy well when it acquired the large Lihir gold mine in Papua New Guinea and UBS views Lihir as creating a drag on the group.
In contrast there are a plethora of other gold miners which look appealing. UBS singled out EVOLUTION FPO (ASX: EVN), Beadell Resources Ltd (ASX: BDR), Silver Lake Resources Limited (ASX: SLR) and Regis Resources Limited (ASX: RRL) among others as having appeal.
With a number of the stocks mentioned above trading near their respective 52-week lows, now could be an ideal time to buy select gold mining stocks. However, simply buying the biggest in Newcrest (which is trading near to its 52-week high) may not be a smart way to play the gold sector.
