Global Gold Stocks May Beat Bullion, Baker Steel Says

Debarati Roy and Thomas Kutty Abraham
Bloomberg
Monday November 19, 2007

Investors should buy gold stocks such as Kinross Gold Corp. because mining companies may rise faster in the next two years than the precious metal they sell, said London-based Baker Steel Capital Managers LLP.

The supply of gold is falling as mining companies struggle to make discoveries even as rising global wealth spurs demand for jewelry, Trevor Steel, co-founder of Baker Steel, which has $900 million in assets, said in an interview on Nov. 16.

Gold approached the $850 an ounce peak on Nov. 7, buoyed by a weaker dollar and record energy prices. JPMorgan Chase & Co., investor Marc Faber and London-based researcher GFMS Ltd. are predicting prices will top $1,000 next year. The gains still aren't reflected in many analysts' profit estimates, said Steel, suggesting gold-mining companies could climb higher.

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``These companies will grow though it may take a while for people to discover them,'' said Steel, before speaking at a two- day conference starting today in Mumbai. ``Gold shares give more leverage than gold alone as you are participating in the company's growth.'' Kinross, Gold Reserves Inc., Golden Star Resources Corp. and Iamgold Corp. are among his favorite picks.

Gold has climbed 24 percent this year to the highest since 1980, outpacing the 21 percent gain in the Philadelphia Gold & Silver Index of companies, including Barrick Gold Corp. and Newmont Mining Corp., the biggest miners. The metal has tripled from a 20-year low in July 1999, while Barrick and Newmont have more than doubled in value.

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