Nomura has retained its 'bullish' rating for the European gold sector, saying that there's potential for further outperformance in spite of the strong showing as of late.

The Datastream World Gold Mining index is now up 18% over the past three months "as investors return to gold equities after a difficult first half where the six-year long de-rating continued," the broker said on Wednesday morning.

Nevertheless, gold equities still remain down year-on-year.

"Increasingly compelling gold demand dynamics and a general lowering of expectations for other more industrial exposed mining companies provide the potential for further outperformance, in our view."

The broker added: "we analyse how correlations between gold equities and gold prices have cyclically broken down and caught up numerous times over the past 15 years. Our analysis suggests that, when the correlations are increasing, gold equities have outperformed the gold price and we appear to be in the middle of one of these phases at the moment."

Nomura has highlighted Petropavlovsk, Centamin and Polymetal as its sector 'likes' going into the third-quarter results. All three are marked as 'buys'. The broker has increased its target price for Centamin to 145p from 130p, Polymetal to 1,425p from 1,340p, and Petropavlovsk to 760p from 735p.

As for Randgold Resources, the broker has raised its target price to 7,400p to from 6,815p but maintained its 'reduce' rating, saying that the stock is "fully priced (for now)".

Petropavlovsk, Centamin and Polymetal were all making moderate gains in London this morning, while Randgold was down 1%.

BC

Related share prices
Randgold Resources Ltd. (RRS) share price
Centamin (DI) (CEY) share price
Petropavlovsk (POG) share price
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