Transitioning into a more discerning bull market in mining stocks

After a good period of new highs the Dow was slugged hard on Thursday in New York, and this had the knock-on effect in Australia. A 3% fall in the Dow is harsh, but we have survived worse. That move aside, we seem to be getting back to a “normal” market where greater scepticism is taking over from the ill-disciplined buying frenzy that was, until recently, dominating in our mining equities market. That is typical on the completion of the first leg of a bull market. The subsequent leg, into which the market is transitioning, is more discerning. Stocks can still rise in more shallow uptrends and there is more time to scrutinise the new flow. It becomes more of a stock pickers market than one driven by FOMO.

Gold continues to be the most important commodity for this bull market, particularly at the junior end. While the bullion price is off its highs, the news last week that the US interest rate will remain low for longer is positive for the gold price. The US dollar is weakening (with volatility) relative to the A$ This will negatively affect earnings of our gold producers but it shouldn’t have a big impact on explorers. 

 WeeklyComm5September2020.pdf