The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
Gold’s recent mantle as a safe haven asset is collapsing as investors instead flock to the USD and bonds.
Both gold and silver are firmly entrenched in bear markets; having lost 38% and 27% respectively year-to-date. These downward trends look set to continue, with tapering expected inside the next four months which is likely to accelerate the rush to exit of the precious metals.
However it’s firms with structural capex and cost issues that have been severely affected by gold’s loss of value.
NCM has capex cost at several key mines in the order of A$2225 an ounce, Medusa Mining is in a similar boat on the cost front. However, unlike NCM which has been able to diversify its costs, MML does not have this luxury and its lack diversification has cost it dearly.
The charts of the gold plays is also not supportive, NCM is currently following the bottom band of its Bollinger pair and this looks firmly entrenched in downward trading. Momentum indicators and the RSI are also not supportive of the stock and would suggest the current short may continue for the several weeks.
I am very aware of a possible bounce as bargain hunters look cash in on ‘cheap’ stocks however until the structural issues in the company are resolved it is like to differ with momentum.
This technical story can be seen across the gold sector. I would suggest the short in the gold space is likely to hold for the time being and that most plays will test the year-to-date lows and may even push through them on macro news that weakens gold further.