Today’s focus will be on gold mining stocks, which were part of a handful of ASX stocks to escape the carnage of the past couple days. Big gains for gold stocks could be around the corner. Why is this you ask?
A host of Australian gold producers have made considerable loses this morning after a day of strong gains yesterday. One of yesterday’s top performers, Northern Star Resources Ltd [ASX:NST], is down 3.55% to $8.43, from $8.73 at close yesterday.
Yesterday I discussed the gold price and provided some reasons as to why the yellow metal could move higher in the months ahead. Let me emphasise the word could.
As far as the timing on that goes, it might pay to keep an eye on the gold price. It’s been under pressure lately, at least in US dollar terms.
There is a good chance that the long term impact of this royal commission will be a complete dismantling of bank business models. As I pointed out yesterday, banks are already starting to put their funds management businesses up for sale. Next, the rest of the wealth management arms (including the financial planning networks) will probably go too.
US markets bounced back overnight. There was no reason in particular. Probably just that, on consideration, the previous day’s falls might have been a little excessive. Still, the market feels a little bit like the proverbial cat on a hot tin roof. That is, edgy, nervous, and ready to jump if need be. In my view, the risk of a trade war is higher than many people think.
If you want to get into an asset in a bull market instead, take a look at gold. Since bottoming in late 2015, gold has been in a bull market. It’s just that most people haven’t noticed. Early bull markets are tough to identify, in the same way that early bear markets are tough to identify.
Aussie gold stocks have outperformed strongly during the market’s recent convulsions. They are a great hedge in times of increasing economic uncertainty like we’re in now. The bull market conditions are set to continue for gold. The Aussie dollar gold price is approaching $1,750 an ounce, the highest price since mid-2016 and enough to fatten most well run gold miners’ margins.
While the US dollar index broke down through support in January this year, Gold did not follow. It still had a bit more work to do. In my view, gold’s move higher is just a matter of time. Many gold stocks have already performed strongly. If you want to profit from this potential move, you need to position yourself now.