Gold Tops $1300.00 To End The Year

Posted on | by Todd | Leave a Comment on Gold Tops $1300.00 To End The Year

What looked like a price meltdown two weeks ago has turned into a powerful 6% rally that is now attempting to take out key resistance at $1312.

Gold has rallied 11 of the last 13 sessions and has closed above $1300 for the first time in three months.

Our technical view is that the $70.00 rally from $1236 looks more like a short squeeze and much of the buying is from those who got too aggressive going down, with shorts being forced to cover.

Although we are longer-term bullish, at $1307 with the speed and parabolic angle of this rally, we believe a pullback into the $1285 level is a reasonable area to buy.

We added NCM to our Top 50 model Portfolio on December 13th at $22.10.

And while the internal momentum indicators for NCM are not as stretched as they are for Spot Gold, a range trade between $23.50 and $22.60 is possible for this week.

A close above the December 5th high of $23.60 would confirm NCM shares are breaking back into a new, higher trading range.

 

Newcrest Mining

 

Will The US Tax Reform Destabilize Global Banks?

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A key part of the US Tax Reform passed last week includes giving US companies a tax break on profits earned and kept in banks overseas.

As per the legislation, US firms can now repatriate offshore earnings at a tax rate of 15.5%, compared with the previous rate of 35%.

In 2005, the Bush administration had a similar “tax amnesty” when over 50 US firms sent back about $350 billion in profits earned overseas.   

In an interview last week, Mr Trump estimated that the total amount of US corporate profits on deposit offshore is between $3 and $5 trillion. 

This is a pretty wide spread. But considering that just 5 tech firms (Apple, Microsoft, Google, Cisco and Oracle) are estimated to be holding over $650 billion offshore, it’s clear that the repatriation numbers will be much higher than in 2005. 

In fact, Apple CEO, Tim Cook, announced that they intend to repatriate over $250 billion during 2018, which is over 70% of the 2005 total spread across 50 firms. 

The most obvious impact of this massive transfer of funds will be the boost in demand for US Dollars. The amnesty plan in 2005 triggered a 12% rally in the USD Index from 81.00 to over 90.00 from March to July.

However, with some EU and Japanese banks already teetering from bad debts and non-performing loans, the short-term implications could be devastating to the banks that have been holding the cash that Mr Trump wants back.

We believe that with just one company like Apple draining $20 billion a month from the European banking system, there will be a negative impact on the health of many EU banks.

At this point we don’t have any clear numbers reflecting the amount of money being held in Australian banks, but we would expect the general strengthening of the USD, on a global basis, will see the AUD/USD retreat back into the lower .7000 handle.

ASX listed stocks which will benefit from the lower Aussie dollar include RHC, QAN, TWE, RIO and NCM.

Aussie Dollar

 

  

 

 

 

 

 

 

 

 

 

 

ALGO UPDATE: Stay Long NCM

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After posting a low of $1238.00 on December 12th, Spot Gold has moved higher and reached $1270.00 in NY Trade last night.

The response of Newcrest shares has been relatively muted, but we expect a pick up over the near-term.

Our ALGO engine triggered a buy signal for NCM on December 15th at $21.75.

We still prefer the long side of NCM, along with the smaller producers SBM, SAR and EVN, and have an upside target near the November 29th high of $24.25.

Newcrest Mining

 

 

AUD Boosted By Last Week’s M&A Activity

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Last week’s Merger and Acquisition activity was a key driver in the Aussie dollar’s move from .7510 to .7690.

Tuesday’s Westfield deal for AUD 32 billion combined with Zurich’s announcement that it will buy ANZ’s life insurance business for AUD 2.85 gave the local currency a bid tone for the week.

All together, the flow was about $9 billion of AUD/USD that needed to be bought to cover the hedging aspect of the M&A transactions. This was enough to push the AUD/USD to .7690 before offers capped the move.

With this buying support absorbed into the market, the technical picture in the AUD/USD looks to be weakening with the longer-term down trend the path of least resistance.

We see the next area of support in the .7565 area. A break of the December 11th low at .7510 could trigger a quick move back to the .7300 handle.

Some of the ASX stocks that would benefit from a lower AUD include: RHC, NCM, QAN and TWE.

Ramsay Health

Newcrest Mining

QANTAS

Treasury Wine Estates

 

Newcrewst Mining Has Been Added To The Model Portfolio

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Our ALGO engine triggered a buy signal on Newcrest Mining at $21.90 yesterday.

Clients and subscribers were notified via email that NCM has been added to our ASX Top 50 portfolio listed in the Premium section of the blog.

The recent slide in Spot Gold prices has impacted domestic Gold producers unevenly. Shares of the smaller firms like SBM, EVN and SAR have held their value and even firmed over recent sessions relative to NCM.

We believe that NCM’s recent sale of its 89.9% stake in Bonikro mine in Cote d’Ivoire has caused some short-term pressure to the share price value investors will support the share price in the $21.80 area.

The current momentum indicators are in oversold territory and the ALGO engine flagged the “higher low” formation based on the October lows near $20.90.

As the price of Spot Gold moves back into the $1300 area, we expect NCM shares to move back into the high $24.00 handle.

Newcrest

 

 

Aussie Dollar Drops On Weaker Trade Balance Report

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The Aussie Dollar dropped close to 1% overnight as yesterday’s domestic trade balance numbers showed a steep contraction for the month.

The AUD/USD hit a six-month low at .7500 as the trade surplus fell to $105 million from $1.6 billion the month before. The street had expected a surplus of $1.4 billion……10 times higher than the actual print.

The sharp drop was driven by a 3% fall in exports and a 2% increase in imports. Details of the report showed much lower levels of exports of Iron ore and coking coal.

There are several names on the ASX that earning revenue overseas and will benefit from the falling Aussie Dollar.

These include QAN, RHC, TWE and NCM.

QANTAS

Ramsay Health Care

Newcrest Mining

Treasury Wine Estates

Buy The Dip In Gold

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Over the last two weeks, the price of Gold has made two attempts at breaking through the $1300.00 mark.

On both occasions, the yellow metal dropped back to find support just above the $1270.00 level.

This technical pattern is known as a “pennant” formation and is a continuation pattern. In this case, the break out points for range extension are $1308 and $1263.

Fundamentally, the case for buying Gold remains compelling. The surge in volatility across global stock markets combined with heightened geopolitical uncertainty supports the logic for owning Gold or Gold mining shares.

We expect the price of Gold to break through the $1300 level over the near-term. Our preferred Gold mining shares are NCM, EVN, SBM and SAR.

Investors looking to profit from a rally in Gold can either buy these shares outright, or buy their CFDs listed on our SAXO Go platform.

Spot Gold

Newcrest Mining

Santa Barbara Mining

Evolution Mining

 

 

 

 

 

 

 

Buy The Dip In Spot Gold

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Spot Gold dropped over $10.00 on Friday after a 200,000 ounce sell order hit the market into the London close.

These types of large block trades (on both the buy and sell side) have become more frequent over the last few months as investors assess the impact of interest rate policies, currency movements and geopolitical risks.

However, with reported Q3 central bank Gold purchases of over 100 tons, we expect the $1270.00 support level to hold before the yellow metal makes another run at the $1300.00 area.

Our preferred names in the Gold area are NCM, EVN and NST.

NCM is currently trading at 30X trailing earnings and EVN and NST are at around 18X earnings.

As such, the correlation between the between the Spot price and these share prices will remain very positive.

Spot Gold

 

Newcrest Gets A Lift From The Weaker Aussie.

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Last week’s production report from Newcrest showed a drop of 5.2% versus the previous quarter. However, the company reaffirmed their full-year production forecast of between 2.4 and 2.65 million ounces of Gold for the year. 

Despite the lower quarterly production, and sideways trade in Spot Gold, shares of NCM have gained about 4% from $21.50 to $22.30 over the last six trading sessions. 

One of the reasons for this is last week’s 2% slide in the AUD/USD.

NCM sells its Gold on the international market which is priced in US Dollars. As the AUD/USD trades lower, the profit margin on a fixed ounce of Gold increases. 

The technical picture has also improved on the stock and we see price resistance near the mid-September level at $23.20. A rally back over $1300 in Spot Gold would likely extend the price range to $23.70.

Newcrest Mining

 AUD/ USD