|11:30AM Lehman says gold stocks not cheap despite recent fall ($GOX) by Tomi Kilgore |
Analyst Peter Ward at Lehman Bros. feels that despite recent weakness in the gold sector, the reward-versus-risk profile is still "unfavorable." Ward noted that the price of gold averaged $312 per ounce in the second quarter, the highest quarterly average since the third quarter of 1997, but most companies he covers posted "meager" earnings. He believes gold stocks have already discounted a "significant and sustainable" rise in gold prices but thinks it will prove "unsustainable," given that the current strength is being driven primarily by the buyback of producer hedge positions. "For some time, there has been a perception that gold stocks are effective portfolio diversifiers in down markets. We respectfully disagree," Ward added. "Despite recent weakness, the overall U.S. equity market has performed much better." The S&P 500 Index ($SPX) is down 8.30 points at 894.48, a decline of 16.2 percent since the end of May. Meanwhile, the CBOE Gold Index ($GOX), currently down 0.3 percent, has now lost 27.5 percent.