Do you own these top gold stocks?

Tuesday, 12 March 2019
Adelaide, Australia
By Bernd Struben

  • Really blatantly apparent
  • ‘Bolton Sounds Alarm on China’s Wholesale Meddling’

What’s 160,000 jobs between friends?

Gauging by the markets…not much.

The US has enjoyed a string of strong job growth figures over the past months. However, February’s non-farm payrolls figures disappointed sharply to the downside.

The forecast growth of 180,000 new jobs instead delivered only 20,000. But that news didn’t stop investors from sending all the major American and European indices higher on Monday.

In Australia the ASX 200 fell 0.4% yesterday. Today investors are taking their cue from overseas’ markets. At time of writing the ASX 200 is up 0.29%.

Energy stocks led the way down in yesterday’s trading. While Aussie gold stocks were among the few to buck the losing trend.

Newcrest Mining Ltd [ASX:NCM] posted a 3.8% gain. It’s handing some of that back today. Still, at time of writing NCM is up 14.4% this calendar year.

Newcrest, as you likely know, is Australia’s biggest gold producer. With a market cap of $19.1 billion, it comes in number three on the world stage. And it’s actively looking to grow.

This headline comes from Bloomberg, ‘Newcrest Pounces on Canada Mine as Gold M&A Spree Rolls On’. The article continues:

Newcrest Mining Ltd., the third-biggest gold producer by market value, agreed a $806.5 million deal to control an Imperial Metals Corp. mine in Canada, extending the spree of deal-making in the sector.

Melbourne-based Newcrest, with assets in Australia, Indonesia and Papua New Guinea, will acquire a 70 percent joint-venture interest in the Red Chris copper and gold mine in British Columbia and become the operator of the site, the producer said Monday in a statement.

Newcrest’s move into Canada comes amid a bout of consolidation in the gold industry, as the largest producers seek to increase the quality of their portfolios, boost reserves of the precious metal or win operational savings.’

Newcrest may be Australia’s biggest gold player. But it’s not the only Aussie gold stock outperforming the wider market.

Regis Resources Ltd [ASX:RRL] gained 5.1% yesterday. That puts Regis, with a market cap of $2.7 billion, up 13.3% year-to-date.

Now not every Australian gold miner is handing shareholders profits this year.

For example, despite posting a 7.4% gain yesterday, St Barbara Ltd [ASX:SBM] is down 6.0% for the year. A healthy reminder that there are no guarantees in the stock market.

Far from it.

But there’s no question that the demand for gold — and for the companies that mine it — is ticking higher alongside increasing global volatility.

In fact, a surge in gold exports in January helped usher in Australia’s second largest trade surplus ever…to the tune of $4.5 billion. That’s just $200 million shy of matching the record December 2016 surplus of $4.7 billion.

According to the Australian Bureau of Statistics (ABS) gold exports reached $2.2 billion in January, almost triple the $790 million of gold exports in December. This alone represents 74% of the total increase in January’s exports.

Venezuela’s embattled president Nicolas Maduro may be busily unloading his nation’s gold reserves in hopes of staying afloat another year. (In 2018 he sold 73 tons of gold, or almost 40% of Venezuela’s remaining stash.) But most of the rest of the world is actively buying.

That trend shows little sign of abating, which should continue to spell good news for the top gold miners in the year ahead.

Our in-house gold expert, Jason Stevenson is keeping a sharp eye on the latest moves. The yellow metal’s outlook for 2019 has him eyeing a potential surge in the share price of his favourite gold plays.

Here’s what he wrote in a recent alert over at Gold & Commodities Stock Trader:

I believe gold prices will surge sharply higher into mid-year. That’s why the gold stocks on the buy recommendation list could make you a lot of money.’

You can find out more about Gold & Commodities Stock Trader by clicking here.

Now a look at the markets.

Markets

Overnight, the Dow Jones Industrial Average closed up 200.64 points, or 0.79%.

The S&P 500 gained 40.23 points, or 1.47%.

Tech stocks were the real winners of the day, sending the Nasdaq up 2.02%.

(For breaking investment advice in revolutionary technology stocks, go here.)

In Europe, the Euro Stoxx 50 index finished up 20.84 points, or 0.63%. Meanwhile, the FTSE 100 climbed 0.37%, and Germany’s DAX closed up 85.64 points, or 0.75%.

In Asian markets, Japan’s Nikkei 225 is up 433.67 points, or 2.05%. China’s CSI 300 is up 1.42%.

In Australia, the S&P/ASX 200 is up 18.11 points, or 0.29%.

On the commodities markets, West Texas Intermediate crude oil is US$56.99 per barrel. Brent crude is US$66.58 per barrel.

Opposing forces are simultaneously working to push the oil price higher and pull it lower. Which has left oil trading right in the middle of the range where I expect it to remain this year.

On the one side we have the Saudis and some fellow OPEC members doing more than predicted to follow through on their production cut pledges. The Saudis, in particular, are sticking to their guns. And Venezuela is devolving into a basket case. Unable to even provide electricity to its oil industry, the export taps are all but closed this week.

From Bloomberg:

Saudi Arabia plans to produce well below 10 million barrels a day in April, a Saudi official said over the weekend. Meanwhile, crude output from fellow OPEC member Venezuela has collapsed in recent days after a four-day power outage, according to a senior oil ministry official there.

You can see the extent of the Saudis’ determination in the chart below:



chart image

Source: Bloomberg
Click to enlarge

10 years ago, a chart like this would have been enough to send investors piling into crude futures and oil stocks. Heck, even five years ago it would have sent the price of oil skyrocketing.

In 2019, though, the latest confirmation on Saudi oil cuts was only enough to see futures in New York rise 1.3%.

Which brings us to the opposing force…the glut in global oil driven by massive increases in US shale production.

Also from Bloomberg:

The United States will drive global oil supply growth over the next five years, adding another 4 million barrels per day to the country’s already booming output, the International Energy Agency said.

US oil output, including natural gas liquids (NGLs) and other hydrocarbons, will climb to 19.6 million bpd by 2024 from 15.5 million last year… Gross crude exports will double...’

You have to imagine that no one is more pleased with OPEC’s faltering efforts to restrict supplies than US frackers.

While OPEC does its best to artificially prop up prices, US producers are set to ramp up production by four million barrels…per day. Cha-Ching!

With the US reaping the biggest rewards, it makes you wonder how long OPEC members’ resolve will last before the cheating begins in earnest.

I’m guessing not long.

Turning to gold, the yellow metal is trading for US$1,293.30 (AU$1,829.28) per troy ounce. Silver is US$15.32 (AU$21.67) per troy ounce.

One bitcoin is worth US$3,852.37.

The Aussie dollar is worth 70.70 US cents.

Really blatantly apparent

You’ll have to forgive me.

Acronyms are not my strong point.

In trying to come up with an alternative one for the RBA, the only one that comes to mind is Really Blatantly Apparent.

That stems from the Reserve Bank’s new research report linking low interest rates to rising house prices.

I know. Shocking, right?

Although it may come as news to RBA Governor Philip Lowe.

You may recall that last week he had the temerity to blame population growth and the limited supply of new homes on the 75% increase in dwelling prices in parts of Sydney and Melbourne since 2011.

Lowe faced the cameras and said the RBA’s record low interest rates had merely increased people’s capacity to borrow.

Erm. Yes, governor. And where do you think they funnelled all their cheaply borrowed money?

If he still had doubts before, his own bank’s research team should put those to rest.

From The Sydney Morning Herald:

Reserve Bank research has found its cuts in official interest rates drove up house prices, and cautions that long-term falls could in the worst case escalate into an American-sized drop in Australia’s property market…

Reserve Bank economists Trent Saunders and Peter Tulip said their research pointed to the role of interest rate cuts as the driving factor behind the pre-2017 property boom.

They found that a one percentage point cut in interest rates lifted house prices by 8 per cent in the two years after the move.

“The model suggests that much of the strength in housing prices and construction over the past few years can be explained by the fall in interest rates,” they found.’

First, you have to love that one of the lead researchers into the Australian housing bubble is named Tulip. In fact, he’s Dr Tulip.

Beautiful.

Second, the sugar hit from the record low interest rates has well and truly played out.

Sydney’s home prices have fallen at the fastest rate since the 1982 depression. I was just starting high school in Washington DC at the time. But if you remember the fallout from that, drop us a line at letters@portphillipinsider.com.au.

Today, with limited room to drop rates further, there could be a lot more pain ahead.

The RBA’s researchers warn that if prices remain stagnant investors will suffer the opposite of FOMO (the fear of missing out). Instead, ‘the fear of not getting out’ would see ‘a collapse in prices of more than 30 per cent over the next six years.’

That won’t come as news to renowned futurist Harry S Dent.

Harry agreed to share his unique insights with our Australian readers last year. Part of his research warns of an almighty property crash in Australia. A housing market he sees as amongst the most ridiculously overpriced in the world.

Indeed, the 30% additional price fall forecast by the RBA’s research team — should house prices not start climbing again and draw new investors into the scheme — would bring property losses close to the 50% that Harry has been forecasting.

But he does far more than that over at his Boom & Bust letter.

Beyond sounding the warnings well in advance, he aims to arm you with the tools you need to financially prepare and survive as the world we know is turned upside down.

You can discover how here.

Now before logging off, don’t forget to check out the latest in politics from The Australian Tribune:

‘Bolton Sounds Alarm on China’s Wholesale Meddling’

For years now, Western governments have hoped that forging closer economic ties with China would see the Communist nation move closer to Western ideology. One where people are — by and large — free to say and do what they wish.

But rather than moving closer to Western governance, the Chinese have been…

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd