From a momentum and technical perspective, it is too early to buy AU. From a fundamental and value perspective we consider AU an aggressive buy recognizing the stock is very volatile.
Prices of physical gold and silver are elevated at multi-year highs. With inflation happening and projected (desired) by treasury and the Federal Reserve, we see no change in this theme for years. The mining industry is awash in low P/E ratios. AU is in the 8 to 10 area – likely lower for projected 2021 P/E ratio. FINVIZ has the projected P/E at 7.98 and the ttm P/E at 9.58.
Technicals are shaping up GREAT!
Not seen on this chart but easily seen on the chart at FINVIZ is the increase in volume. It shows up as rising accumulation in the chart above (TC2000) in the Chaikin Money Flow (CMF). The MACD is showing a rising trend as well. We especially like the action in both MACD and CMF when we look at their action post March 1st, 2021. In the chart itself we see the potential for a double bottom forming in March. The indicator mentioned confirm buying pressure leaning into (positive) on the second leg of the potential double bottom.
In conclusion we like the fundamentals. It looks like the correction that started Aug 1, 2020 is about to end. Though volatile we see the fundamental support making this a lower risk trade or longer-term position. AU is volatile enough that we consider it a trading stock while we consider a company like Karora Resources (KRRGF)* $2.65 a long-term position investment. Review the charts on both. Know your companies and how to use them to fit your investment goals. Check us out at www.LivingOffThemarket.com.
LOTM Research & Consulting Service
Where Value meets Buy Signals!
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* An account related to LOTM holds a position in this security.
Neither LOTM nor Tom Linzmeier is a Registered Investment Advisor.
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