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Gold up, others languish

GOLD punched above $600 an ounce once again last week, the third time in the past 12 months.

Punters expect the price to head up another $50 an ounce over the next six months.

“The remaining ingredient for a spectacular bull run in gold shares would be the announcement of a significant discovery,” stockbroker DJ Carmichael says in its weekly brief.

The likelihood of this occurring has been improved with new money going into floats such as Jackson Gold, Vulcan Resources, West Musgrave, Westonia Mines, Oroya Mining and Independence Gold.

Given that North Americans and South Africans now own Australia’s largest gold mines, where can investors go?

“Firstly, this is not an investment for widows and orphans. Investing in the gold sector is a high-risk strategy,” DJ Carmichael says.

“Still, gold producers such as Sons of Gwalia, Croesus, Equigold and Gindalbie offer relatively good value in the sector, despite recent concerns about the level of gold and currency hedging.”

Bank stocks start to ease

IN its weekly watch of the market, State One Stockbroking analyst Kamlesh Chand notes that bank stocks have started to ease, media stocks are still in steep downtrends while some resource stocks and gold shares have come in for heavy selling.

“The good news is that the retail and health sectors could be bottoming,” Mr Chand says.

“Bank stocks have been easing lately and this week made noticeable downward moves., Overall they are moving sideways and are now moving towards to lows of the last two years.”

Based on technical charts and price patterns the technical report puts the Commonwealth Bank down to as low as $27 a share during its downward trend.

The National Australia Bank could find support at $33 before falling to a new support level of $30.

The ANZ may drift down to $17 and Westpac could fall as low as $12.50 after sustaining $15 support for the past 12 months. S

t George Bank, meanwhile, could ease down to $17.50.

On Tuesday, the Australian Prudential Regulation Authority reminded banks not to grow short-term profits at the expense of adequate investment in resources to manage the evolving business risks.

APRA CEO Graeme Thompson said Australian banks had been world leaders in generating high profit growth and returns to shareholders.

“Healthy profitability is a key contributor to bank soundness, but we are increasingly seeing signs that the pressure for continued profits growth may be risking negative consequences for soundness in the longer term,” he said.

In response APRA has warned that it will lift its on-site visit frequency for banks, look more closely into their investment in management and control across the entire risk spectrum and ensure that each conglomerate is maintaining good risk management practices across the whole group.

Mr Chand says diversified resources stocks all look shaky.

“While BHP has managed to hold onto some support, WMC and Woodside are moving downwards with renewed momentum,” he says.

“Western Mining has plunged to new lows and further losses are likely. Woodside has broken below all recent support levels and looks quite negative.”

In the Media sector, weakness is also apparent according to State One.

“Media stocks remain weak and even lower prices are likely,” Mr Chand says.

Newscorp could be heading for a target of $8. Publishing & Broadcasting Ltd, which is hovering around $8, is at “half of its peak of $16 made in early 2000 and prices may consolidate here”.

Fairfax could find a low level of $2.50 a share, Seven Network could slide down to 1999 lows of $4.20, while the Ten Network could drift down to $1.80.

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