TORONTO (Reuters) - Canada’s main stock index eked out a small gain on Tuesday, helped by a surge in major gold miners as the price of bullion hit a three-week high, while bank stocks wilted in the aftermath of an uninspiring earnings season.
Barrick Gold Corp (ABX.TO) jumped 5.3 percent to C$17.91, outpacing gains in shares of its rivals, indicating that investor sentiment around the miner has improved on the back of its recent moves to address corporate governance concerns and strengthen its balance sheet.
“You’ve already seen some action by the new management at Barrick which has been viewed favorably by the market,” said Gavin Graham, chief strategy officer at Integris Pension Management Corp.
“Looking at this stock, it’s probably as cheap as it’s been in relation to the price of gold in the last 20 years.”
Several other gold miners joined in the rise, with Goldcorp Inc (G.TO) adding 3.3 percent to C$23.08 and Kinross Gold Corp (K.TO) gaining 5.4 percent to C$5.12, as investors scrambled to cover earlier bets that the price of gold would fall.
“It’s encouraging to see gold and gold stocks are up quite nicely,” said Elvis Picardo, strategist and vice president of research at Global Securities in Vancouver.
“With a number of sections of the market looking fairly valued or overvalued, it’s logical to look at sectors that have not moved,” he said. “It’s quite likely that gold stocks are getting a second look at these levels.”
Gold miners are heavily represented on the Toronto Stock Exchange’s S&P/TSX composite index .GSPTSE, which closed the session up 11.23 points, or 0.08 percent, at 13,324.01.
“We saw less-than-spectacular earnings, they weren’t a disaster but investors haven’t been used to flat year-on-year earnings or even declines,” said Craig Fehr, Canadian market strategist at Edward Jones in St. Louis, Missouri.
Energy companies Canadian Natural Resources (CNQ.TO) and Suncor Energy Inc (SU.TO) gained - 1.1 percent and 0.7 percent respectively - as a lessening of a supply glut helps to shrink the discount applied to Canadian oil versus the WTI standard.
“We like both of those,” Fehr said of CNR and Suncor. “If we see a continued narrowing of the Canadian crude discount relative to some of the sweet oils that would benefit them on pricing.”
The broader resource sector that dominates Canadian equities should gain from further evidence of a global economy recovery, while Integris’ Graham said stock prices in the gold sector could grow another 40 or 50 percent if the price of gold rises to $1,400 or $1,500 an ounce. It is currently trading at around $1,260. <GOL/>
Additional reporting by John Tilak; Editing by Bob Burgdorfer and Phil Berlowitz