The below post is a copy of a publication on the 18th of October. Since making the post, gold stocks have performed well and we now look to trim the gains and rotate into oversold industrial & REIT names.
Vaneck Vectors Gold Miners is under Algo Engine buy conditions following the entry condition earlier this year at $30. It is a current holding in our ALL ASX ETF model portfolio.
GDX ETF has corrected from $45 to $38 over the past 8 weeks. We feel buying support will now begin to increase.
Individual names are also now appearing on the radar, such as Newcrest Mining Northern Star Resources, Evolution Mining, OceanaGold and Gold Road Resources.
OceanaGold is under Algo Engine buy conditions and is seeing increased buying interest as the stock rallies from the $3.90 support level.
Gold prices hit a three-month high this month as investors flee to the safe-haven bullion amid escalated trade tensions and lower global interest rates. Additionally, if we see the US dollar weaken, gold will appreciate as it becomes cheaper for investors holding other currencies.
Buy OceanaGold and look for a rally to $4.50+
OceanaGold is under Algo Engine buy conditions and we see support building at $3.90
Lower interest rates tend to lift gold, as it reduces the opportunity cost of holding the non-yielding bullion.
Gold is now trading at US$1,310 per ounce.
OceanaGold is a current holding in our ASX 100 model.
They have reported 2018 underlying EBITDA of US$364m and company cash reserves increased to US$108m.
Buy within $4.00 to $4.10 range.
Evolution Mining buy within the $3.00 to $3.30 range.
Newcrest Mining will pay US$807m to Canadian listed Imperial Metals for the proposed acquisition of 70% of the Red Chris mine.
The opportunity provides for operational improvements and possible long-term exploration upside.
We continue to view Newcrest as expensive and prefer Evolution Mining, OceanaGold and Northern Star Resources as our gold exposure.
Gold has sold off in recent trading sessions, following the strength in the US dollar. The sell off has now created Algo Engine buy conditions in Evolution Mining, St Barbara, OceanaGold & Northern Star Resources, all of which are current holdings in the ASX 100 model.
Newcrest Mining is still in the early stages of forming a higher low and may take another few days before we see an Algo Engine buy signal appear.
Oceanagold, (OGC), has recently been triggered as an Algo Engine buy signal, following the higher low formation at $4.20.
The company reports calendar year 2018 earnings on the 19th of Feb and the consensus forecast for NPAT sits around US$135mn, based on an all-in gold cost price of $900oz.
FY19 production guidance will be at 550k/oz
After reaching an intra-day high just under $1370.00 in mid-April, the price of Spot Gold has dropped over 12% and matched a 1-year low of $1210.00 last week.
The recent strength in the USD, weakness in the Yuan and uncertainty over global trade tariffs are some the reasons used to explain the slide in the yellow metal over the last 2 months.
What is clear is that the technical picture in Gold is deeply oversold and due for a material correction higher.
As illustrated in the chart below, the last 8 times that Gold fell more than $90.00 over a 3-month period, the rally that followed averaged close to $150.00, or just under 13%.
Despite the recent weakness in Spot Gold, local Gold miners have performed reasonable well and have expanded production both domestically and abroad.
Our ALGO engine is now showing buy signals for NCM, SBM, NST, OGC, SAR and EVN.
In addition, NST, EVN and NCM are included in our ASX Top 100 model portfolio.
We currently see the $1235.00 area in Spot Gold as an inflexion point which could drive the price higher and would be a net positive for these local Gold names.
After posting a 2-year high at $1370 in early April, the price of Spot Gold has dropped over 6% and made an intra-day low of $1281 during Monday’s trade.
The yellow metal has now firmed into the $1295 area and looks set to trade back over $1300 over the near-term.
Our ALGO engine triggered a buy signal in OGC into yesterday’s ASX close at $3.32.
In addition to the recent slide in Spot Gold, shares of OGC have been pressured lower after its Q1 update showed that production and sales were both lower due to severely cold weather at its Haile Mine in the USA.
The daily charts show solid support in the $3.10 area and we see scope for a move back over $3.65 as the spot Gold price moves higher.
On August 8th, Spot Gold posted a low during the New York session of $1254.00.
Overnight, the yellow metal posted a 10-month high of $1341.00, a 7% gain in less than a month.
Over the same period of time, Newcrest mining has rallied from $20.25 to post a high of $23.70 early in yesterday’s session. This move represents a bit less than a 17% gain.
Even though the heighten geopolitical tensions which have supported the Gold price are still very much a part of the market, technical momentum indicators are signalling that investors can expect a short-term correction lower.
We believe the medium-term price trajectory in Gold will remain intact after the overbought conditions are alleviated.
As such, we suggest taking profits today in NCM, along with the smaller Gold miners: EVN, SAR, NST and OGC.