US markets continued their recovery rally overnight with the S&P500 now about 100 points away from regaining the level it had just prior to the big fall at the end of July. It remains to be seen if the optimism will sustain on the back of the yield curve inversion occurring again signalling the Fed is behind the curve. Fed chief Powell did not indicate nor hint of preemptive rate cut strikes other than saying the July cut was a recalibration. My feel is that the Fed will not reduce rates any higher than 25 basis points each time despite many pundits and hopefuls believing they should take a stronger stance. In reality, if you think about it, the monetary policy toolkit (of which rate cut is one, QE another) is offering more of a psychological boost to confidence (consumer and business) rather than being effective in stimulating investment (given the high levels of indebtedness) - a large rate cut of say 50 or 100 basis points (as POTUS would like) could also be seen by economic participants as desperate and when people have that perception, do you think they are likely to make more capital investment or take a wait-and-see approach- furthermore, we should expect the Fed to continue to hold on to their diminishing monetary ammunitions so a large rate cut , while could give a stronger boost to avert recession, is rather unlikely. The Fed's goal is to ensure financial stability for the benefit of the markets and banks, and that is what the rate cut lever is being used for.
While the market recovers, one would have expected that Gold will lose the gains it made but on the face of it , it remains resilient sitting around the USD1500/oz mark. I believe gold, after this consolidation period, will attempt a next upleg move towards USD1600/oz then eventually USD1800-1900/oz.
I see NST as a good accumulative position to be in the position for the eventual rally and this is a stock that I can sleep well with, not only because of defensive gold but because they know and have proven that they are a great gold operator (as they are with the newly acquired Pogo mine) and provided great long term return for shareholders including dividend equated to 6pc of annual revenues. It is somewhat unusual for the stock to be sitting below $12 when previously at above $14, gold price was not even as high as it is now. So IMO there lies the opportunity now. I also expect both BC8 and CHN to continue being strong performers going forward (and surprise BC8 did even better when gold price consolidate) as their market cap are still low and can move higher with news of more development with their gold discovery operation.
