From Smart Investor:
Resource stocks are now starting to look very interesting. The analysts have been downgrading their numbers for four or five years now so they have been in perpetual downgrade mode.
The problem for analysts is that they were way too bullish on commodities when they were falling and were continually having to adjust forecasts lower for the last few years.
Now the opposite is happening – a number of brokers have commodity price forecasts that are well below current spot prices.
So what we are seeing is the first leg of the resources rally – the one where no one really believed it at first but now everyone accepts that the lows have been seen and they won’t be revisited.
I think the gold rally will keep going. I’ve been bearish and I’ve been bullish at times but right now Australian gold stocks have just been goingballistic. The returns have been brilliant but that opens them up to short-term fluctuations.
What you need to really watch is for the underlying support – watch how they trade when they get sold off. If a stock is making higher lows – then you know that there is very strong [underlying] support and there are enough buyers out there who are “buying the dips” – I watch for this in all stocks and markets as one of the most powerful signs that it’s going higher over time.
Newcrest, Northern Star, Regis Resources and Evolution, to a lesser extent, have been the stocks I’ve followed closely. As the Aussie dollar has come off and the gold price has gone up they have begun to make an absolute fortune.
He’s supposed to be a legend of some sort but he’s bit late here. Anyway, I too expect more from gold, after a decent pullback.
