Australian Investment Blog

Have we been too smart playing gold? Investing / trading in gold stocks over recent years, especially Newcrest Mining (NCM) and Regis Resources (RRL), has proven to be very profitable for Market Matters and its subscribers. However, we are currently bullish the precious metal over the next 1-2 years, but we are not long and local gold stocks continue to edge higher. We still feel the gold price has topped out in $US for the short term, but significant weakness in the $A since last month's rate cut by the RBA, has sent the precious metal soaring in $A terms aiding the local producers - see chart Gold in both $A and $US Daily Chart

Also, announcements that high profile investors like George Soros have been buying gold stocks, primarily due to China factors, significantly helps underpin the sector. The Chinese are purchasing all the gold they produce and more from countries like ourselves and Canada - this gold stays in China and is highly unlikely to hit the market for the foreseeable future. Also, many investors are concerned with the Chinese economic position and the potential for them to again, start devaluing their currency. The Market Vectors Gold ETF (GDX) has more than doubled in 2016, when most equity markets have struggled to be positive - see chart 2. The trend in gold stocks remains strong and we are bullish, but remember the recent pullback in iron ore stocks, they can be sharp and dramatic - we will be looking to pounce on any such opportunity. Market Vectors Gold ETF Daily Chart