Surely this has got to be the bottom........It is good to read...

Surely this has got to be the bottom........

It is good to read stuff like this

Gold oversold: Foster
Kristie Batten
Wednesday, 16 May 2012

GOLD has fallen below $US1600 an ounce and continues to weaken but Foster Stockbroking says gold is oversold and has highlighted its top stock picks among producers.

In its morning report, Foster pointed out that the gold price had dropped 13% from its 2012 highs of $1770/oz to the current price of around $1560/oz.

“As a result there was significant deleveraging of positions across the gold stocks over the past month,” Foster said.

According to the analyst’s data, Newcrest Mining is down 21%, Resolute Mining is down 24%, Gryphon Minerals is down 36% and Northern Star is down 34% in the past month.

“We view the case for higher gold prices remains firmly in place driven primarily by further monetary easing policies from the US and European central banks and continued Eurozone worries,” Foster said.

The falling Australian dollar should have positive impacts for Australian producers but Foster believes the sell down in Australian dollar terms is particularly overdone and local producers are now in a similar position to their early August 2011 levels.

“We believe the market has been oversold and expect stocks to recover somewhat from their discounted share prices,” Foster said.

Foster said the current weakness among gold equities provided an attractive opportunity for investors.

Its preferred stock picks are Resolute and Northern Star.

Resolute was selected for its unhedged leverage to the gold price and expected profits this year and was rated as a buy with a price target of $A2.

Shares in Resolute were 2.7% or 4c lower to $1.42 in early afternoon trade.

Meanwhile, Foster favours Northern Star after meeting with managing director Bill Beament last week.

Analysts rate Northern Star as a buy with a 90c price target.

Northern Star was down half a cent to 62c this afternoon.

By comparison, Newcrest was down 4.3% or $1.04 to $23.81, Alacer Gold was down 7.8% or 48c to $5.66 and Perseus Mining was down 5% or 12c to $2.25.