In the Olympic spirit we though it timely to investigate what is happening in the world of gold. Request our special free Golden Stock Opportunities Special Report, which provides a more detailed on analysis of specific gold stocks that are earning money, with low gearing levels and some that are even a paying dividend.
In London 2012 there appears to be a changing of the guard in relation to the competition for gold medals, with the Chinese dominating proceedings over the USA and the rest of the world. It’s amazing how this story is unfolding in the corporate world too.
The price of gold had been in a steady uptrend until mid-2011, when it went parabolic (as shown below). Typically when a market pulls back from a period of exuberance it takes a while for the market place to reset itself and this is proving the case this year. Seasonally the gold price takes a breather from June through to August, but this year we have the additional headwinds of the worsening eurozone debt crisis which is threatening the European, if not the global financial system.
Chart 1: The Gold Price is Adjusting
The Gold chart above shows that gold traders are not expecting that there will be a coordinated global move by central banks to increase their monetary easing policies in the near-term.
Reviewing recent market performances, we can see stock prices have had a great run in the past few weeks, as traders have been buying in anticipation of European central banks taking further steps to support eurozone economic stability. Traders have also been buoyed by news in recent days that German Chancellor Angela Merkel and French President Francois Hollande have joined European Central Bank President Mario Draghi in promising to do “whatever it takes” to protect the euro.
Overnight, traders took profits on their gold positions as US Federal Reserve Chairman Ben Bernanke fell short of announcing a ramping up of the record stimulus, even as economic growth slowed. The Federal Reserve pledged to provide additional support if the economy deteriorates further, particularly unemployment, but this disappointed investors anticipating a more definitive sign of further monetary easing. The Fed will wait until at least September before acting and will have the “luxury” of assessing reports on unemployment for July and August, and the steps that the European Central Bank is proposing to take to ease the worsening eurozone debt crisis. The announcements from the ECB meeting have disappointed investors as there was no direct action plan proposed.
In today’s article I’ll show you how to identify some golden stocks that investors and traders should have on their radar, in anticipation of additional quantitative easing by central banks.
Gold Stocks
Gold stocks have been punished (down around 30 to 50 percent in the past six months), as the gold price has pulled back from mid-last year. But if the central banks do move on monetary easing in a coordinated fashion by the end of the year it may well be time to start investing in some of the downtrodden gold stocks.
The last time we highlighted gold stocks was in early March 2011 (and before that early September 2010), and both times it proved to be timely, as the gold stocks had a great run in the following couple of quarters.
The precious metal will be in for a re-rating if the central banks do move towards further easing, which is now not likely to happen until at least next month. The gold producers will be set up for a re-rating too if gold’s fortunes turnaround.
So today we’re going to show you how to review the gold mining sector, using the D2MX Trade Tool features available in the Market Analyser and Bourse platforms.
Start by setting up a User Watchlist (under the Pricing/Quote menu) and either nominating specific stocks or selecting from the GICS sector of interest.
To create a sector specific watchlist, open a watchlist, and select the “N” button to open the Navigator window. Select the “Industry” tab and drill down into the Materials/Metals/Gold sector and then highlight the stocks of interest (hold down the CTRL key for multiple selections). Then save the list by selecting “Save_As” and nominate the watchlist name, say ASX_Gold (GICS).
If you like you may reduce the list by taking advantage of our Special Golden Report which provides an abridged list deduced from some additional filters including fundamentals of the stocks.
Menu 1: Setting up Gold Stocks Watchlist
Once you have set up the watchlist you can quickly review the stock charts by with the push of a button.
Chart 2: Weekly Chart of Northern Star
Here is a sample chart of Northern Star. In the D2MX chart you can nominate your watchlist to scroll through (using right click menu), then use the Watchlist arrow button on the chart toolbar to skip to the next chart in your watchlist.
Some simple indicators will assist in your assessment of the stocks, such as the 13 and 50 day moving averages, volume, stochastics and the parabolic SAR, which should keep you on the right side of the market trend.
Investors also need to be mindful of the liquidity of the stock.
The Trade
Gold has been in the doldrums ever since the mid-2011 peak, but if the central banks manage to orchestrate a coordinated global move on monetary easing, gold will return to favour. The US Federal Reserve is not likely to move until September, but gold and gold stocks may start to move in anticipation of central bank easing.
Keep the stocks that have been highlighted here, on your watchlist, ready for the trade setups, or request our free Golden Stock Opportunities Special Report, providing a more detailed on analysis of gold stocks that are earning money, with low gearing levels and some that are even paying dividend.
Utilise the features in the Market Analyser and Bourse platforms to select and track your trades. You will save time and potentially increase your returns by trading with the trend in sectors that are in favour.
Contact me at D2MX Trading on 1300 610 024 and I can help you trade, using a number of strategies that will give you the tools to navigate this market and help you boost your returns on investment.
Michael Hevern
Investment Adviser – D2MX Trading
This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.
Tags: Commodities, gold, gold price, northern star, trading tips
