Over the last 48 hours we have seen some big drops in the mineral sector after some lower than expected economic results from China on top of continuing uncertainty and panic coming out of Europe. Cyprus looks like it will have to sell up to 60% of its gold reserves to pay off bad debts in their banking sector and there are real fears Spain, Portugal and some of the other debt ridden Euro countries will need to likely follow suit.
I thought a couple of months back Gold was looking like a good buy with the fear of inflation potentially on the horizon and a continually devalued USD pushing investors to the precious metal. Now it looks like we could see some serious fear selling and potentially push lows we haven’t seen since the GFC.
I think a great buying opportunity exists in the future here. I would really like to see Gold get some support and start to challenge its 30 day EMA before locking in a buy, we don’t want to try buy into it as it continues to drop this rapidly. Silver is the same, having fallen 30% since April. Also being hammered are mineral miners such as Australia’s big miner Newcrest Mining (NCM).
I thought NCM was undervalued recently when I was looking at it at about $22 , as of today it has dropped below $16.50. As with Gold we would like to see this stock get some support (which it hasn’t had for some time now!) At its current price though NCM has hit levels it hasn’t seen since post GFC and as far back as 2006. This for a stock that was trading at $40+ at various times in 2010-2011.
I am waiting and watching very closely at the moment, minerals may continue to get hammered short term and by no means am I saying to buy now. I am however strongly advising you continue to monitor the news, the US markets and the price of Gold. Watch for support and a push back towards the 30 day EMA (or your preferred intermediate MA) and get ready for a potential buying opportunity in the near future.
Also we need to be wary, this could be the start of a more serious market downturn. The AORD have sputtered the last few weeks and we may have seen the end of the bull run we have had since September last year. Watch, wait and analyse. Be ready. The decision to pull the trigger will ultimately be yours and timing will be everything.