Gold sector climbs for second day The gold sector has climbed higher for the second straight day as the precious metal recorded its biggest gain this year. Gold soared more than 3 per cent on Monday, boosted by an unwinding of short positions and weaker-than-expected US housing data. The weaker data also saw the dollar fall against its major counterparts, boosting the gold price. Gold is sold in the US currency. "Yesterday we saw nice gains broadly across the sector and that will carry on today I think," Leyland Asset Management senior portfolio manager Rohan Schmidt said. Gold companies the best gainers on the market Australian gold companies made up eight of the top 10 gainers in early trading on the stock market today. Sirius Resources, an exploration company focusing on gold, nickel and base metals, was the early leader on the ASX200 and was up 11.11 per cent at midday. The second best performer was Evolution Mining with a lift of 6.88 per cent. Newcrest Mining recorded a 6.44 per cent rise and Mineral Cudeco a gain of 5.28 per cent. Kingsgate Consolidated had a 4.80 per cent rise, Paladin Energy a 4.33 per cent gain and Panaust Ltd a 3.97 per cent lift. Oceangold rose by 3.92 per cent. "They have been bashed about of late and you'll probably want to look at the companies that don't have any management or issues that have hurt them in the past such as Newcrest, and you want to look at companies that are the lowest-cost producers," Mr Schmidt said. Gold miners were also among the best performing members on the Australian stock market on Monday. Medusa Mining had the most gains on the ASX200, rising 15 per cent. St Barbara lifted by 7.63 per cent, Evolution Mining by 7.5 per cent and Perseus Mining by 7.4 per cent. Oceangold, Silver Lake Resources, Kingsgate Consolidated, Beadell Resources and Newcrest Mining were also among the top 10 gainers. Short positions and US housing data The rally in the gold price was due to the unwinding of short positions on Monday as well as weaker-than-expected US housing data overnight, Jordan Eliseo, chief economist at precious metal supplier ABC Bullion, said. It started in early Asian trading and it was probably sparked by a report which showed that a lot of the short positions that have been in place for gold and that have been at record highs of late have started to unwind. People got nervous and they also started covering their positions, and that caused the initial rally up above $US1300," Mr Eliseo said. There was a continuation overnight off the back of some disappointing US data. Home sales came out worse than expected and a continuation of the weakening trend in US housing since yields started to pick up. What we're seeing is a realisation from the market that the Fed cannot taper, or if they do taper, it'll be a long way away from normalised monetary policy, and people ... don't want to be short gold any more. Gold was trading 2.5 per cent higher, at $US1337.60, about noon. Bearish year for gold Mr Eliseo said it was important to remember that gold remained in bearish territory this year. It has lost 20.23 per cent so far this year. It's not that people are getting wildly bullish on gold, they're just not as bearish any more. But the futures market was so tilted to the short side that even people just removing bearish bets is enough for the price to rally quite strongly," he said. The precious metal price was at $US1600 when it slumped in April, and again in June, pushing some of Australia's highest-cost gold mines into the red. LINK: /business/mining-and-resources/price-slide-whacks-gold-miners-20130628-2p2ee.html Jobs were shed as miners cut back costs and focused on more profitable mines. Low-cost producers the best value Macquarie Private Wealth analysts said operators such as Regis Resources and Beadell Resources, with their low-cost operations and free cash-flow generation, were the standouts in the sector. "We reiterate that we see the gold sector as an under-performer relative to the broader market over the short to medium term," the analysts said. That said, for those investors with a longer time horizon or those willing to trade the volatility in between, we believe that the opportunity to derive significant returns from the space will present itself, namely in the chance to buy quality names at cyclical lows. Morgan Stanley analysts said their valuations also favoured low-cost operators such as Medusa Mining or those with cash balances, such as Alacer Gold, or a combination of both, such as Regis Resources. These companies are most resilient to a lower gold price, but also exhibit good valuation leverage to gold price upside ... We maintain an overweight recommendation on MML, and equal-weight recommendations on AQG, EVN, GRY, PRU, RRL and RSG.