In this case, all that glistens is gold

Gold shares have done little in the same period, notwithstanding the impact on earnings and valuations that the gold price rise is having.

But late last week there were signs that the disconnect between gold's advance and the market's treatment of gold shares is being addressed.

Gold equities rose some 1.48 per cent on Friday as measured by the S&P/ASX gold index. Helping fuel the better tone was a rash of bullish gold price predictions by some big name investment houses.

UBS and Barclays Capital tipped gold to average $US2000 ($1909) an ounce or more next year. That compares with Friday's close of $US1858 - a price at which your average gold producer is enjoying margins of more than $US1000 an ounce.

With forecasters lining up for $US2000 next year, you've got to think the present $US1000 an ounce margin is here to stay.

And that means gold equities will have to be treated accordingly. As UBS noted, the upgrade in its 2012 forecast to $US2075 an ounce from $US1380 an ounce means the producers are in line for some turbo-charged earnings growth.

Looking at our leading producer, Newcrest, UBS has increased its 2012 profit expectation from $1.26 billion to $2.17 billion. That's a 72 per cent rise. There is a trickledown effect on the sector.

For what it's worth, UBS reckons the best buys in the sector are Perseus, Adamus, Ausquest, Beadell Resources and Newcrest.

Garimpeiro is interested in the local gold companies making their way to the Denver Gold Forum on September 18-21 in Colorado Springs. The present valuation of the Australian producers is a fraction of that enjoyed by their North American peers. Assuming their presentations go well, there is a chance their "value" proposition will be too hard for investors to ignore. The Aussies include Newcrest, St Barbara, Resolute, Silver Lake and Saracen.

SOLID SILVER

Silver has done none too shabbily in the past year, outperforming gold by rising some 109 per cent to $US41.38 an ounce on Friday - despite long-running talk of it being in "bubble" territory.

The longer that silver has held at these levels, the more intense the search by investors for silver exposure in the domestic market.

Garimpeiro has mentioned BHP Billiton's annual 40 million ounce-plus production at Cannington in Queensland, as well as the move of Alcyone and Cobar Consolidated into production.

Then there's White Rock Minerals, spun off from Rex Minerals in October last year.There are high hopes for its modern-day exploration hunt at Mount Carrington, 100 kilometres west of Lismore. With a production history that dates back to the late 1800s, Mount Carrington was last worked between 1987 and 1990 by Joseph Gutnick's stable with limited success. But changed commodity prices and improved geological understanding, means Mount Carrington is well worth a fresh look.

An E.L. &C. Baillieu analyst, Adrian Prendergast, reckons White Rock has redrawn the geological mapping of the region, coming to the conclusion that historical mining missed the strongest mineralised zones "moving through" the region.

White Rock has a resource of 190,000 ounces of gold and 10.5 million ounces of silver, mostly within 50 metres of the surface. The hope is that a new drilling program will lead to an upgraded estimate early next year. Then White Rock can start to think about producing. Prendergast noted that White Rock was not a stock for the risk averse before setting a 55? price target. That compares with Friday's closing price of 26? a share, giving the group a market cap of $16 million. It is holding (and spending) about $5 million in cash.

Garimpeiro notes that 10 million ounces of silver back in October 2008 when White Rock floated was worth about $US100 million. On Friday's close for the metal, you can make that $US400 million. Mind you, that is for stuff sitting in a vault.