NEW YORK (Reuters) - Gold has soared 10 percent in six weeks, but shares in gold mining companies have fallen and analysts believe potential investors might be concerned the precious metal's surge will not last.
"There is quite a lot of anxiety among the core investors, the gold bugs, about the gold breakout," said Peter Spina, who operates an investor web site, goldseek.com. He said every time gold has hit a new high, the surge has not been sustained.
"Many investors are sitting on the sidelines, but once gold proves itself, they will rush back."
Jeffrey Nichols, managing director of American Precious Metals Advisors, said the rebound in the stock market since last year's recession has meant competition for investor money from other stocks and also gold-based Exchange-Traded Funds, or ETFs.
"Equity markets are still very strong and investors who might go into gold company stocks see competition in other stocks," he said. "The introduction of gold ETFs appeals to people who might otherwise buy gold company stocks. It's as easy as buying shares and gives you a proxy for buying gold."
Nichols said stocks are subject to risks which are not shared by gold bullion or ETFs.
"There is management risk, country risk, labor risk and mining costs are always increasing, so many investors see these things and are attracted to ETFs instead of buying shares."
Since September 1, the New York gold futures price has risen from $953.50 per ounce to $1,048.60, passing the previous record high of $1,030 last Tuesday.
But in comparison, the S&P Gold Index , which tracks gold mining company stocks, has fallen by about 12 percent since July 2008.
Top gold miners Barrick Gold Corp (ABX.TO: Quote, Profile, Research, Stock Buzz) (ABX.N: Quote, Profile, Research, Stock Buzz) and Newmont Mining (NEM.N: Quote, Profile, Research, Stock Buzz) rose last week as gold took off. But Newmont was trading around $46.50 on Friday, below its 52-week high of $49.84 in June, and Barrick's share price of $39.48 was off the $41.98 high last month.
Frank Holmes, chief executive officer of U.S. Global Investors, a fund manager in San Antonio, Texas, said gold historically has rallied in September, followed by a correction in October or November.
"For every one percent correction in the gold price there is a 3-percent correction in company stocks," he said. "Stocks did not make a new high, but bullion did.
"(So) Real investors do not believe this is sustainable... they think they have to be cautious," he said.
His advice to investors? "Go buy a 22-karat piece of gold jewelry, or you can buy ETFs. But the stocks correction will be more severe."
Holmes noted oil, copper, zinc and other commodities all surpassed previous record highs when adjusted for inflation, but gold has not. In 1980, gold hit a high of $850 per ounce, which would be the equivalent of $2,300 today, he said.
Nichols said the outlook for gold in the short term depends on how much scrap starts to come into the market from places like India, Dubai and Turkey.
"In the past year or two, when we have seen gold rally sharply, a large increase in old scrap has put a cap on the market," he said. "We have not seen it yet, which allowed gold to move above $1,060 this week."
He said another factor was the dollar and concern that the U.S. Federal Reserve "will keep its foot on the accelerator for a longer period, raising the risk of inflation down the road.
"It will be natural, if we see an influx of old gold, for the market to pause, consolidate and maybe trade down to $1040 and then at some point later to move higher. If there are no new developments, it will likely pause before moving higher," said Nichols.
"But in the longer term, if gold goes higher, equities will go higher and junior (exploration) companies and high-cost gold producers will move the most as their bottom lines are more affected by the gold price."
Spina summed up the mood: "There is a sense of 'let's be cautious' in the markets and guys are expecting another correction."
