Aussie gold equities down 24% from blow-off top

I warned in December 2022 that I didn’t like the smell of the rally in gold stocks.

My investing strategy post mortem involving Australian gold equities was that I was very disappointed in my premature exit of Northern Star Resources but very pleased with the delayed, staged exit in Evolution Mining.

Whilst I tend to have a habit of leaving the party too early, my analysis and discipline in how I read the ‘tape’ kept me and clients in good stead by not chasing, adding or commiting new money as the rally extended itself.

Today, the price action in these stocks coincide with my view that Silver and Gold prices will (have) ease.

Whilst, precious metals will have their day in the sun, simply, I think there is a little more consolidation and digestion ahead in their respective stock prices before that day comes.

In the case of Northern Star Resources (NST.AX), many people did the wrong thing, at the wrong time paying A$11 per share, let alone A$13.

Some are now sporting losses of 24%.

This analogy could also be applied to the recent trading in Newcrest (NCM.AX) with takeover arbitrageurs and the like, paying a price as high of A$25.80, when Newmont lobbed in a bid.

Newcrest shareholders may be soon accepting an equivalent bid around the A$19.50 mark.

I may be interested in Northern Star Resources when the stock trades below A$8.10, if not A$7.30.

As I have warned in many an asset price, there are gaps beneath.

February 27, 2023

by Rob Zdravevski

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