Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Okay, I've been investing for quite a few years now, but I'm the first to admit that I don't understand much of what goes on in global financial markets. So, can you explain why precious metals are being sold off so heavily right when you'd think people would be buying and positioning themselves for this supposed commodities super cycle and fiat currency devaluations etc?
Hi David,
We believe the current moves in gold stocks are largely dependent on the individual companies, for example, heavyweight Newmont (ASX: NEM) was trading less than 10% below its all-time high on Wednesday yet gold is anchored more than US$1,000/oz below its “panic-line” January high. At the same time the index is down ~0.3% YTD and the precious metal -1.0% YTD yet a number of the miners are still performing well:
However, as calm returns to precious metals the market has become far more discerning on the gold thematic with companies that are dropping the ball being punished, headlined by Australian heavyweight Northern Star (NST) -18%.
In terms of the underlying gold price, it takes time to wash out excessive bullish exuberance after such a powerful run – remember in December/January the queues outside of the gold merchant with retail punters trying to buy gold coins & bars.
Patience is required: Assuming we are in for a “Commodities Supercycle” historically they take 15-25 years from peak to trough with plenty of smaller bull and bear moves along the way – markets rarely move in straight lines, unfortunately!
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