It may seem like a confusing time to be a mining investor, but Jeb Handwerger insists it doesn't take a rocket scientist. "Stick to the fundamentals," he says. "The technicals will eventually reflect the fundamentals."
As Lawrie Williams writes below, bank analysts appear to be totally reactive in their forecasts, therefore it is worth paying attention to those who have spent a long time not only analysing these markets but also been in them for significant periods.
After seven straight weeks of price declines, the gold stocks rebounded last week and are off to a good start this week. We can’t be sure if a double-bottom or some complex head and shoulders pattern is developing.
Gold is going to benefit from a further move of real interest rates into negative territory. There is a long-standing inverse correlation between real interest rates and the price of gold. The Fed has clearly signaled that it will take its eye off its 2% inflation target.
The market bottomed that week and the shares are now on the cusp of a potential double bottom. Some bottoms occur instantly while some take a few months to develop. We believe that gold and the gold stocks are primed to head higher in the coming weeks.
We are currently witnessing a short term weak market in the large gold producers and precious metals as investors flock to overbought equities. The long term trend remains up in gold and silver and we may be approaching a turning point sooner rather than later.
New gold buying has a positive secondary effect on the gold mining sector. Not only should this trend repeat again in the coming year, but it's likely to be amplified as gold stocks finally respond to a long overdue bout of catching up.