Far East Capital Newsletter
Graphite still dificult for producers while gold interest is moderating
19 Oct 2019

In This Issue

Graphite still dificult for producers while gold interest is moderating

Sentiment has been gradually weakening over recent weeks as the synchronised slowdown around the world has evolved against a backdrop of the trade war. Commodity prices have been easing in a direct response to lower growth expectations, though nickel continues to outperform other metals. Lack of conviction has been the most common mood of investors, even when fundamentals in specific sectors appear sound.

China’s rhetoric on the international stage is looking increasingly untrustworthy. Its era of economic outperformance is becoming weary but there are some conflicting statistics with its copper imports rising 10% in September over the prior month, to reach a 10 month high. Iron ore imports rose for a third straight month to reach a 20 month high. Yet, there are still expectations that we are about to see the slowest growth rate in China for almost 30 years. Exports to the USA did drop 22% in September, but that is directly attributable to the trade war. Again, lack of conviction is the issue.

The best performing mining sector of 2019, the gold producers, looks as if it is done for a while. Profit taking has been active in recent weeks with many charts showing breakdowns of uptrends. It would need a concerted effort on the part of bullion to change the mood but there could still be trading opportunities while the gold price demonstrates volatility. The “get set and forget” approach would be a high risk strategy in the near term. Chart support levels for many of the companies is somewhat lower than current levels. 

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