Market Analysis from the Investor Signals team.
GDX.AXW is now under Algo Engine buy conditions following the higher low formation at $29.
Individual names are also now appearing on the radar, such as Northern Star Resources, Evolution Mining, OceanaGold and St Barbara. We view the buy signals as early stage opportunities and investors should add them to their watch lists and monitor the short-term trend indicators for an increase in buying interest.
The above chart is the Vaneck Vectors Gold Miners ETF.
Newcrest Mining will pay US$807m to Canadian listed Imperial Metals for the proposed acquisition of 70% of the Red Chris mine.
The opportunity provides for operational improvements and possible long-term exploration upside.
We continue to view Newcrest as expensive and prefer Evolution Mining, OceanaGold and Northern Star Resources as our gold exposure.
Gold has sold off in recent trading sessions, following the strength in the US dollar. The sell off has now created Algo Engine buy conditions in Evolution Mining, St Barbara, OceanaGold & Northern Star Resources, all of which are current holdings in the ASX 100 model.
Newcrest Mining is still in the early stages of forming a higher low and may take another few days before we see an Algo Engine buy signal appear.
Daily price volatility in Gold has reached a 7-month high as investors weigh the impact of equity market uncertainty to higher interest rates in the USA.
Since trading as low as $1160.00 in mid-August, the yellow metal rallied close to 10% to post an intraday high of $1243.00 on October 26th.
From a technical perspective, we consider the wider intraday trading ranges as an opportunity for investors to profit from the increased activity in the local mining shares.
Both EVN and NST are currently in our ASX Top 100 model portfolio.
We will update specific entry levels in those names as Gold finds traction above support at $1190.00
Northern Star
Evolution Mining
After reaching an intra-day high just under $1370.00 in mid-April, the price of Spot Gold has dropped over 12% and matched a 1-year low of $1210.00 last week.
The recent strength in the USD, weakness in the Yuan and uncertainty over global trade tariffs are some the reasons used to explain the slide in the yellow metal over the last 2 months.
What is clear is that the technical picture in Gold is deeply oversold and due for a material correction higher.
As illustrated in the chart below, the last 8 times that Gold fell more than $90.00 over a 3-month period, the rally that followed averaged close to $150.00, or just under 13%.
Despite the recent weakness in Spot Gold, local Gold miners have performed reasonable well and have expanded production both domestically and abroad.
Our ALGO engine is now showing buy signals for NCM, SBM, NST, OGC, SAR and EVN.
In addition, NST, EVN and NCM are included in our ASX Top 100 model portfolio.
We currently see the $1235.00 area in Spot Gold as an inflexion point which could drive the price higher and would be a net positive for these local Gold names.
Our ALGO engine triggered a buy signal on NST on May 24th at $6.16.
At the time, we referred to the company’s recent production forecast of 600,000 ounces of Gold for 2018 as a net positive.
However, a recent research note from UBS has upgraded their production to 690,000 ounces and set a 12-month target on the stock at $7.50.
Considering the recent weakness in Spot Gold, we expect NST to continue to trade higher as the Spot market improves. 
Northern Star
Shares of NCM are over 1.5% higher to $21.40 in early trade after a Citi Research report upgraded the stock to “BUY” and raised their 12-month target price to $25.80 per share.
The report focused on the share price relative to the replacement costs of the assets, which suggests that NCM may end up as a takeover target for a larger mining company looking for Australian assets.
Considering that the performance of Spot Gold has been tepid over the last month, local gold mining shares have been well bid.
At current levels, we prefer adding to long positions in NCM and NST.
Newcrest
Northern Star
Our ALGO engine triggered a buy signal for NST into yesterday’s ASX close at $6.18.
This “higher low”pattern is referenced to the low of $5.60 posted on February 8th.
Their most recent quarterly report showed that cost of production was stable at $1075 per ounce, which still reflects a healthy operating margin.
Further, NST expects to lift annual production to 600,000 ounces by the end of the year. The company also reported $439 million in cash and no bank debt.
The daily charts show solid support at $6.00 with a medium-term upside target of $7.10.
Northern Star Resources