North American gold equities are recommended

London-based brokerage house Barclays de Zoete Wedd is recommending investors focus on the North American gold sector in the short-to-medium term as opposed to Australian and South African gold equities. “The North American gold sector is expected to outperform due to production growth in 1992 and subsequent years, a long reserve life and a stable production cost structure,” writes the firm in a June publication titled Gold and Gold Mines. It adds that the North American yields are relatively low but increasing.

Negative sentiment, it says, surrounds the Australian gold sector in part because of the impending corporate tax on gold production and company failures among the middle- ranking gold producers. In South Africa, Barclays says, racial and industrial tensions combined with falling production and rising costs suggest potential for further underperformance so long as the gold price is weak.

“Our view of the gold price remains cautiously optimistic for the medium-to-long term but recognizes the potential for static short- term performance, with prices capped by aggressive Russian selling and negative sentiment,” writes Barclays.

Gold, which started 1990 at just under US$400, recently fell to below US$350 before rebounding to around US$360.