Gold miners’ shares are too expensive

By Nat Rudarakanchana
International Business Times

hand160Major gold producers must adapt to survive an ongoing decline in gold prices in the next several years, according to an in-depth Citigroup Inc. gold industry report from Tuesday.

As part of its sobering report, Citi analysts wrote: “The April price moves severely damaged the notion that gold provides any degree of risk protection or really acts as a safe haven. … The opportunity cost of holding gold has never looked higher, when relative performance to other asset classes is assessed. Indeed, investor confidence in the recovery story, principally in the US, has clearly been at the expense of gold.”

The report fires a little barb at gold companies, noting that 10 top gold companies have collectively burnt through $11 billion in cash since 2000, despite a fourfold increase in gold prices. “Shareholders funded this, with the number of shares trebling during this period,” reads the note.

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