Value in the gold sector

Value in the gold sector

It was another ugly week as many junior stocks slumped further, in many cases giving back the gains of recent weeks. Interestingly, some of the better quality gold stocks looked stronger.

The Sentiment Oscillator shows that the market has fallen back to the support line going back to April 2013, but note that there have been three occasions where this has been breached in spike-down events.

Last week Kerry Stevenson's Gold Conference in Sydney provided some welcome relief from the euphoria of battery metals, rare earths and other exotics which can motive traders in the market. Activity in these latter stocks is based more on sentiment than sound fundamentals, whereas it is easier to work out earnings potential for gold companies.

On a general note there were plenty of gold stocks that are selling at depressed prices owing to the bear market. Now is the time to sifting through these in anticipation of the market turning upwards. It is usually easier to calculate fundamental value for companies with good quality gold resources than it is for most other commodities provide you go through the check list of important parameters and make sure that the management is up to the task.