Spot Gold dropped over $10.00 on Friday after a 200,000 ounce sell order hit the market into the London close.
These types of large block trades (on both the buy and sell side) have become more frequent over the last few months as investors assess the impact of interest rate policies, currency movements and geopolitical risks.
However, with reported Q3 central bank Gold purchases of over 100 tons, we expect the $1270.00 support level to hold before the yellow metal makes another run at the $1300.00 area.
Our preferred names in the Gold area are NCM, EVN and NST.
NCM is currently trading at 30X trailing earnings and EVN and NST are at around 18X earnings.
As such, the correlation between the between the Spot price and these share prices will remain very positive.
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.
Gold prices touched their highest intra-day level of the year on Friday, temporarily topping $1,300 an ounce before pulling back to settle unchanged on the day.
Gold had traded up to $1,303 for the first time in 2017, getting a lift from safe-haven demand on the back of weakness in global equities, a terrorist attack in Barcelona and concerns about President Trump’s pro-business political agenda.
Despite the late pull back into the weekend, the technical picture in Gold looks constructive. On a “measured move” basis, the break above $1300 points to the November highs near $1340.00 as the next area of resistance.
We still prefer the long side of NCM, along with smaller-cap miners EVN, SAR and NST.
Our medium-term price target for NCM is $23.10 and $2.80 for EVN.