Westhouse has cut the target prices of junior gold miners in its universe following the 6% drop in the gold price since the start of the year.
The broker cites the strength of economic data coming out of the US and China as a key reason why gold has weakened.
Should the US economy and the US dollar continue to strengthen it sees potential for the gold price to fall further.
In addition, there is the potential for a sell-off of gold exchange traded funds (ETFs), which could put further downward pressure on the gold price.
Since the start of the year, about 140 tonnes has been sold by gold-backed ETFs; the first time a sell-off has really been seen since ETFs were first introduced in 2003, said Westhouse.
The average spot price for the year to date is US$1,641/oz, which has prompted the broker to cut its gold price forecast for 2013 to US$1,600/oz from US$1,750/oz.
Even this drop has a big impact on earnings forecasts and share price targets, adds the broker.
Highland Gold and Petropavlovsk continue to represent good value versus their peers, it suggests.
Highland has had a solid start to the year, having just beaten its production guidance of 200-215,000oz in 2012.
Production for 2013 is guided to be 225-240,000oz, while Westhouse’s estimate is 251,300oz. Even so, the target price is cut to 130p from 160p.
Petropavlovsk’s decision to hedge 399,000oz of production at US$1,663/oz until March 2014 looks increasingly sensible, adds Westhouse, but its price target reduces to 440p from 480p.
Centamin impressed on an operational level in 2012, but has been affected by numerous issues related to the ongoing political situation in Egypt.
If the upcoming court case, scheduled for 20 March, rules in Centamin’s favour, there is the potential for a positive re-rating and Westhouse has upgraded its view to buy with a 65p target.
Avocet Mining had a tough year in 2012 and unless it can successfully address its short-term cash flow issues, growth is unlikely in the near future says Westhouse. The target price is reduced to 21p from 35p.
African Barrick Gold has no production growth in the short term and a wide array of issues to address. The broker has cut its target price to 195p from 255p and keeps a sell stance.
Spot gold was US$2.1 lower at US$1590.50, platinum eased US$2 to US$1,591 while silver edged down to US$29.03.
Major movers
African Barrick Gold up 2p at 243.5p
Highland Gold down 4.9p at 95.2p
Randgold Resources down 70p at 5,495p