Randgold Resouces tipped for investors willing to ride the volatility of bullion

18th August 2014

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As the price of bullion enjoys a rebound broker interest in African gold mining and exploration group Randgold Resources is accelerating.

Following a caustic period in 2013, the price of gold has enjoyed something of a rebound in 2014 where year-to-date it is up almost 8% to circa $1,297 per ounce.

Traditionally viewed as a ‘safe haven’ assert, experts have pointed to the unrest in the Middle East and the Ukraine situation as primary reasons for the resurgence in the precious metal.

Nicholas Brooks, head of research and investment strategy at exchange traded fund (ETF) provider ETF Securities notes the group saw its physical gold ETF, which tracks the price of bullion, witness inflows last week of $75.5m, bringing the trailing 4 week total to US$282.6mn, the highest since August 2012

He said: “Last week marked the fifth consecutive week of net inflows into long gold ETPs, with monthly flows the highest in two years as European investors’ watch Russia’s continued meddling in the Ukraine with trepidation.”

In line with the better sentiment towards the precious metal and the mining sector in general, Rangold Resources has also witnessed the value of its shares rise by 4% over the past 12 months and by a robust 11% in the last three. Presently the analyst consensus on the firm’s shares is pointing towards a ‘buy’.

Helal Miah, investment research analyst at The Share Centre has also tipped the FTSE 100 constituent as a ‘buy’. He said: “Randgold Resources is a gold miner whose principal operations are in Mali, a country with significant levels of political instability. The recent tensions have impacted confidence in the company’s share price but the operations on the ground remain largely unaffected. The company has been ramping up production consistently to record levels while expansion and exploration seem to be progressing well.”

Miah noted that along with the political risks in Mali the share price has also been knocked by the fall in gold price following the start of the withdrawal of monetary stimulus from the US. At a forward price to earnings multiple of 21 times, the shares do look a little richer compared to the peer group but this factors in the prospects from the group’s exploration programme and expansion of the resource base he added.

Miah said: “The most recent quarterly production update continued with the theme of increasing production levels, so we recommend Randgold Resources as a ‘buy’ for investors willing to take on a high level of risk for a play on gold.”

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