EMR led the gold sector lower on Monday falling -9.4%, the most in sixteen weeks, as the rally in precious metals cooled following improved sentiment about credit quality in the US and trade frictions between China and the US. In our opinion, there’s nothing sinister behind the move, just some profit-taking after a strong move in a “crowded trade”, but at this stage, the next 5-10% move is a coin toss to us. A ~$US120 recovery in gold overnight, taking the precious metal back towards its all-time high, should see at least a partial recovery by the sector this morning.
- We like the gold sector into weakness, but a deeper correction wouldn’t surprise us.
MM is neutral towards EMR around $5
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