Research

Disclaimer: All information on this section is of a general nature.
Before making any investment decision, you should seek the relevant advice.

Daily Resources Overview

 

Before the ink had much time to dry onthe finalized Barrick-Randgold deal, Newmont Mining Corp. announced it wasbuying Goldcorp, Inc. on Monday for $10 billion to create a gold producer thatwill top Barrick’s now $24 billon market cap once completed. The agreement willcombine two gold industry leaders into Newmont Goldcorp,to create an unmatched portfolio of operations, projects, explorationopportunities, reserves, and people in the gold mining complex.

This deal brings more investorattention to an undervalued sector, which may have formed a significant bottomlate last year. While gold was forming an accumulative rounded bottom, juniordevelopers, who are in the process of proving up high-margin projects, werebeing sold for tax-loss. Many of these sub-$200M market cap companies remaindeeply undervalued in comparison to where they were trading the last time goldwas being bid near $1300 in early 2018. Once gold climbs above $1300, themarket will be gradually re-rating high-margin project developers, or producerswill be acquiring them.

Meanwhile, the overbought gold pricecontinues to consolidate in a $20 range above $1280 after making an eightpercent move higher in just eight weeks. Although the overall trend in gold isclearly higher, it has run into strong resistance after a long rally and isattempting to work off an extreme overbought situation by consolidating in thistight range. Thisweek’s failure to close above $1300 is most likely signalling a conclusion tothe current rally and the beginning of a correction.

Another positive scenario taking placeis gold beginning to rally with the stock market and remaining well bid despitethe recent strength in the U.S. dollar. Bullion accumulation is being driven bypolitical events as are the currencies and share markets and is reflectinginvestors uneasiness about what lies ahead.

 This Fedinduced weakness in the world’s reserve currency, along with global marketvolatility, influenced the market to begin pricing in the possibility of arate-cut. If the Fed indeed cuts rates later this year, it could easily be thecatalyst to break gold out of the rounded base below $1375 it has been formingfor nearly six years.
 
Posted on 21/01/2019 9:00:00 AM

Back to top