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Is the Gold Rush Over?

The gold rush is over. No, I’m not talking about that TV show on the Discovery Channel. I’m talking about the near US$1,900-per-ounce run that gold was trading at following the collapse of 2008. With the markets in a tailspin six years ago, many investors began dumping currency and loaded up on gold instead, leading to a boom among miners and cable channel programmers.

But now things appear to be changing south of the border, a sense of normalcy has returned, unemployment rates are returning to pre-crash levels, and Canada experienced a trade deficit in August. All these factors have strengthened the U.S. dollar and are luring investors away from their gold security blankets.

On Friday, gold prices fell to just under $1,200 per ounce erasing all the gains the commodity made in July when it was trading at the mid-$1,300s. In fact, gold prices are only within $9.20 of hitting a four-year low and would signify the largest drop in price in the past 30 years.

Several analysts predict that the next year and a half will be a rough ride for gold prices, as the U.S. continues its recovery with rumors of interest rate hikes — that is, as long as the market cooperates. But where does this leave some of Canada’s top gold companies in the near future?

Double-dipping in trouble

Kinross Gold Corporation (TSX: K)(NYSE: KGC) has already been having a rough year for its stock, which has a 52-week range of $3.52 to $5.99 and closed Friday at $3.59. Not only will Kinross have to navigate these low-priced waters but it will also have to battle against the torrents of Russian sanctions, which affect 30% of its global production.

The average price target for Kinross is $6.03 but the most recent report to be released is from RBC Capital, which cut its price target to $4.50 and its rating to sector perform from outperform.

El-doh-rado

Eldorado Gold Corp.  (TSX: ELD)(NYSE: EGO) is a major producer of gold with 750,000 ounces produced per year, and before Friday’s gutting of gold prices, some mining insiders pegged Eldorado as a company that could easily reach 1.5 million ounces of annual production from its current, mostly long-life assets.

But if gold continues to fall, it will eventually compromise the company’s capital growth projects, especially its foothold in Greece. Eldorado closed out Friday with a stock price of $7.77 and has a 52-week range of $5.73 and $9.37. The average price target is $8.76, and just like Kinross RBC Capital recently revised its outlook on Eldorado increasing their forecast from $7.08 to $9.00

Days of future prices

Gold prices over the next year or two don’t look pretty, with some analysts using a wide cushion of $1,150 to $1,350 per ounce, with others such as Goldman Sachs Group Inc. estimating gold reaching a low of $1,050. When we get to estimates ranging to 2018, we see price targets of $1,400.

Then again, if the market follows its current trend of a meltdown every seven years, this could turn into the moment that people in 2015 or 2016 will regret not buying in at.

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Fool contributor Cameron Conway has no position in any stocks mentioned.

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