Somebody once said of war that it was hours of boredom with flashes of terror.
2024 feels kind of like that…at least as far as the market goes.
Except swap the word ‘terror’ for ‘opportunity’.
What I mean is that the Aussie market, on many days, drifts, grinds, drops, rallies…all within a tight range. Net result = not much change. It IS kind of boring.
But there have been some stonking bursts of action too!
In January, for example, retailers ripped up. Next month? Copper stocks soared.
Individual shares like DRO and GQG and NXL melted up in a big way too.
However, it can’t be denied that…
…2024 is proving a little tougher than expectations at the start of the year.
Check out this comment from LiveWire this week…
‘Copper was supposed to be the next big thing in 2024, but after a rollicking start to the year, the copper rally appears to have petered out — another victim of the dreaded commodity price cycle.’
It’s true. Commodity stocks are off the boil right now too. Lithium is weak. Oil is middling. Copper — deflated recently.
China’s economy is…inspiring no one. Australia’s isn’t much better, at least at the aggregate level.
Does that mean there’s no opportunity?
Of course not. You just need to know where to look…
There is one commodity that IS firing right now.
It’s called GOLD.
In Australian dollars, it’s a cracking $3650 an ounce. That’s a whisker away from its all time high.
I’m not here to ‘sell’ the idea of gold as an investment to you.
All we want to observe right now is the very basic dynamic that all share investors want to see from any industry.
That’s great margins and a bright outlook. The gold industry has this…right now!
Think of this in the context of the current share market.
What are our options to try and make a buck?
We’ve just discussed that the wider commodity sector is subdued currently.
Retailers? Hard to see them soaring with consumers still under pressure and rates staying high.
Banks? They’ve run very hard already this year. Hard to see that rally going indefinitely.
REITs? No immediate rate cuts in sight to juice them up.
Tech stocks? Yes, no, maybe. I’m not sure.
Of course, this is just a broad-brush stroke. No doubt there are specific opportunities within each.
I like to keep things simple.
What I can see, as plain as day, is that the Aussie gold price is a barnstorming one. The gold industry is awash in profits and revenues right now.
If you’re going to dance where it’s raining…it’s raining here!
Or, as Tom Hanks says as Elvis’s manager in the Baz Luhrmann biopic, ‘Let it snow!’
That said, even gold stocks aren’t rollicking up in the way we might expect considering the current conditions.
I’m not sure why that is, truth be told.
I’ve seen a gold bull market or two, and the volume and price moves in the sector can move in big numbers when it’s really firing.
It’s a little more subdued than anyone would have thought earlier.
That’s okay. We can live with that.
What we do know, at least as of today, is that any gold producer selling gold right now is getting a cracking price.
That is setting them up to receive a river of money every week it continues.
I can be patient with my shares when this is going on…even if the share price is not moving. Money talks eventually.
The longer this high gold price continues, the more pressure builds for a break to the upside.
Now, of course, we have no way of knowing whether the gold price DOES continue to stay this high.
But it’s been up over AU$3,000 per ounce all year in 2024. I don’t see any reason for this to change in the short term.
That said…
God didn’t make life easy, nor the share market.
Gold stocks are notorious for being crazy lucrative sometimes…and driving you nuts at others.
Two recent examples of disappointment are Bellevue Gold [ASX:BGL] and Regis Resources [ASX:RRL].
I follow both but don’t own either.
BGL threw the market a recent wildcard when it decided to raise money unexpectedly. The share price is down 35% from its recent high now.
And Regis has been, frankly, a disappointment for years.
I’m telling you this because, while the gold price may be stonking, each individual gold stock marches to its own drum in terms of production, margins, cashflow and operations.
That’s why guidance here is crucial. It’s not a sector to swing at any old stock.
Two recent profitable ideas (so far) for my members are Spartan Resources [ASX:SPR] and Genesis Minerals [ASX:GMD].
Spartan is up a stonking 90% since May. That’s another example of the cracking opportunity in a ‘boring’ market.
I can’t take all the credit for that one. I had some help from my colleague Brian Chu — our gold specialist.
See? Good guidance can be golden.
If you like the idea of attacking the gold sector further, see Brian’s latest analysis here.
Best,
 |
Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator
PS: Even if you’ve never watched Murray Dawes’ Saturday morning Closing Bells…you need to tune in this Saturday…
It’s the 150th episode. And Murray’s cooking up something that looks very interesting indeed. A specific set-up and trade that could soon be in the perfect buy zone.
Murray’s ‘Closing Bell’ trades are free to all Fat Tail Daily members. And, if you’ve tracked them over the 149 episodes…you’ll know he’s had some crackers.
You won’t want to miss this one.
Look in your inbox on Saturday morning for the subject line:
Closing Bell #150: A Special Trade
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