Perth Mint Gold Sales Double In September

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The Perth Mint reported sales of 46,415 ounces of Gold during the month of September. This is more than double the 23,130 ounces sold in August.

The Perth mint refines over 90% of newly-mined Gold in Australia and ships to investors world-wide.

As illustrated in the chart below, this trend in higher demand could indicate higher Spot Gold prices in coming months.

As mentioned in a previous blog post, Gold has rallied after the Chinese Golden week for the last four years.

This year, the yellow metal has traded $25.00 higher since the Chinese market has been back online and is now over $1300.00 per ounce.

At this point the local Gold mining names haven’t rallied in the same percentage terms as spot Gold. However, we consider this price lag to be temporary and to see higher share prices in the near-term.

Perth Mint Gold Coin Sales

BOQ Shares Reverse Lower

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Shares of BOQ have given back all of yesterday’s gains as CEO Jon Sutton warned of industry headwinds, regulatory uncertainty and increased scrutiny of banking fees. 

Mr Sutton also pledged to improve its complaint resolution protocol after the Financial Ombudsman Service said the bank had topped the list as Australia’s worst offender for disputes for home loan customers for the fourth consecutive year.

BOQ shares are currently down 1.75% at $12.83. Technically, we see the next area of support near the $12.25 area. 

Bank of Queensland

 

 

US Banks Fall On Lower Revenue Numbers

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Despite beating top line quarterly expectations, shares in US banking giants JP Morgan and Citigroup both fell on Wall Street as trading revenue numbers showed a sharp decline on a year-on-year basis.

Citigroup shares closed 3.4% lower after their trading revenue dropped 16% and JP Morgan shares slipped 1% lower on a 27% fall in year-over-year revenue.

We expect the other major US banks to report the same fall in trading revenue as lower volumes on the NYSE, combined with historically low price volatility, reduces overall market participation.

The next key levels of support are $67.50 for Citigroup and $91.70 for JP Morgan.

Citigroup

JP Morgan

 

Gold Trades Higher After Golden Week

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A few weeks ago, we posted a report outlining the correlation between the Chinese Golden week holiday and the price of spot Gold.

Over the last four years, the price of Gold has dropped into, and during, Golden Week and then traded higher once the Chinese markets came back online.

As the chart below illustrates, spot Gold posted a low of $1262.00 last Friday and has since lifted by over $30.00.

We continue to look for Gold to trade higher into the end of the year and re-test the the $1350.00 level.

As such, we like long positions in NCM, EVN and SAR. 

Spot Gold

 

Newcrest Mining

Evolution

Saracen

Limited Upside In Woolies

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Shares of WOW traded down to $24.40 last Tuesday; nearly reaching the key support level of $24.20 noted in our October 5th blog.

Prices have bounced since then as wholesale food reports show that deflation is returning to the fruit and vegtable market.

Last week’s report showed a -2.3% price growth, which improves the margins on WOW’s private label brands, as well, as fresh produce.

We see the next level of price resistance in the $25.60 area and consider WOW reasonable buy/write opportunity at current levels.

Woolworths

 

 

ALGO UPDATE: AMP Is Approaching Resistance

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One of Australia’s largest money managers, AMP, has caved in on the pressure from index and computerized trading and has dropped their fees, and is looking to sack most of their active equity managers. 

The bulk of the $29 billion in funds the firm now manages will be rolled into lower-cost strategies including existing quantitative funds within AMP Capital. 

Our ALGO engine triggered a buy signal for AMP at $4.80 on August 21st.

We see key chart resistance in the $5.25 area and would look to exit long positions at, or near, that level.

AMP

 

Class Action Claim Filed Against CBA

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After a month of speculation, law firm Maurice Blackburn filed a statement of claim in Federal Court yesterday saying the CBA board knew of potential AML breaches in 2015 and failed to tell shareholders.

It’s estimated that the class action could cost the bank hundreds of millions if the suit proves successful. This doesn’t include the AUSTRAC litigation which will begin in November.

Shares of CBA are down fractionally at $76.40  in early trade. Our ALGO engine triggered a sell signal for CBA at $84.20 on July 4th. Since then the shares have posted a low of $73.20 on September 8th.

It’s our base case that the recent recovery in the share price is corrective and that slower loan growth combined with the potential litigation will weigh on the shareprice

Technically, the next key support level is found at around the $71.00 level.

Commmonwealth Bank

 

RIO Extends Share Buyback Scheme

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Shares of RIO Tinto have reached a one-month high of $70.40 following their announcement that they will return a further USD 2.5 billion to shareholders following the sale of Coal and Allied.

This will lift the total shareholder returns to USD 8.2 billion ($4 billion in share buybacks and $4.2 billion in dividends).

Considering that the share buyback scheme will be done off-market, its likely that the shares could be priced 8 to 10% below market value.

Nevertheless, with RIO’s balance sheet getting a shot in the arm, we expect additional returns in dividends in February 2018.

Our longer-term target on RIO is in the $76.00 to $76.50 area.

Rio Tinto

Sonic Gets A Boost

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After trading as high as $24.50 on June 29th, shares of SHL dropped over 15% to post an intra-day low of $20.60 last Thursday.

The company got some good news last week when they won an exclusive contract to provide a pathology laboratory in two of London’s hospitals.

The contract has a term of 12 years and is expected to contribute over 12 million Sterling in revenue per year.

Looking at the internal momentum indicators, the share price is slightly oversold and has upside potential to the $22.70 area.

We consider SHL a reasonable buy/write stock which offers price appreciation and enhanced cash flow with the derivative overlay strategy.

Sonic Health