originally published Wednesday, November 29, 2023

All Gold & Silver Stocks

While it may seem a bit silly spending hours writing up one stock when there are dozens or even hundreds of them out there to consider, the reason that I do it is that I feel like I am telling a story, and in the case of a stock like Anglogold Ashanti it is worth spending more time on it because it is one of the flagship stocks of the sector that can be used to form the cornerstone of a Precious Metals stock portfolio and this is the time to consider the large cap gold stocks, because as we have seen in recent days, they tend to lead the sector higher at the start of major bullmarkets. While the juniors tend to outperform later they often don’t perform well in the early stages of a sector bullmarket and as many of them are strapped for cash they tend to pounce on any rise in their stock prices as an opportunity to soak beleagured shareholders with fundings. So a good strategy is to start with the majors and then progress through the mid-caps in the direction of the juniors as the bullmarket progresses and if you want to leverage performance during the early stages of a bulllmarket one way to do it is via call options in something like GLD.

Anglogold Ashanti had a very good day yesterday rising some 6% but as we will proceed to see, there is plenty more to go for as it still hasn’t even broken out of its intermediate base pattern yet. It would have been written up sooner but I simply didn’t have time and wanted to do it justice. As it performs well technically, the charts that we are going to look at this morning certainly make for interesting viewing, not just for their own sake but because of the very positive implications for the entire sector, as is the case with the other big golds that we have looked at in recent days, namely Agnico Eagle and Barrick.

Let’s start by looking at the very long-term 20-year chart to gain a Big Picture perspective on what’s going on. On this chart we see that following the sector rout in 2012 and 2013 after the great 2000’s bullmarket, a gigantic Cup & Handle base pattern has formed and interestingly the rout itself actually formed the left side of the Cup of this pattern. The right side of the Cup was formed by the dramatic runup out of the Covid Crash lows of Spring 2020 and this was followed by a long and dreary period for investors in the sector as the Handle of the Cup & Handle base formed from mid-2020 onwards. Note that the gold and GDX charts are added at the top of this chart which enables us to see that PM stocks have dramatically underperformed gold itself in recent years and that includes Anglogold Ashanti, and this divergence is viewed as very positive for the sector as it denotes a complete lack of speculative interest such as often precedes a massive bullmarket and clearly stocks have a lot of catching up to do, especially as gold itself is already pushing a breakout above the key $2100 level that once it occurs is expected to “light a fire” under PM stocks.

Having gotten a grasp on the Big Picture of what is going on we will now zoom in to examine the Handle of the giant Cup & Handle base in more detail using a 5-year chart. This chart enables us to discern the positive price pattern development over the past several years for as we can see, after the price dropped down from the mid-2020 peak to mark out the Handle consolidation, the pattern has evolved into a large Head-and-Shoulders bottom and with the price still close to the Right Shoulder of this reversal pattern we are clearly at a very good point to take positions in the stock even after yesterday’s sharp gain because this chart makes clear that the upside potential from here is BIG, for a lumbering behemoth of a stock like this.

Now we move on again to examine the Right Shoulder of this H&S bottom in detail on the 1-year chart which shows how the price retreated in an orderly if rarther steep downtrend to the Right Shoulder low and beyond this that the Right Shoulder itself is made up of a lower order Head-and-Shoulders bottom that is an intermediate reversal pattern, with yesterday’s sharp advance being the rally to complete the Right Shoulder of this lesser order H&S bottom.

Finally we zoom in yet again via the 6-month chart to examine the intermediate reversal Head-and-Shoulders bottom in more detail. On this chart we see that yesterday’s sharp runup, which was on good volume, completed this base pattern so now it is ready to break out. Positive technical factors supporting an upside breakout from the pattern soon include the strong volume on yesterday’s advance – and also the fact that many other big golds broke out yesterday – and the uptrend in the Accumulation line as this H&S bottom has formed. The last point to observe is that it won’t take all that much of an advance to lead to a bullish cross of the moving averages.

The conclusion is that Anglogold Ashanti is a non-speculative buy here for all timeframes and this is viewed as a good cornerstone stock of a Precious Metals sector portfolio. At the time of writing the company’s website appears to be down.

Anglogold Ashanti website

Anglogold Ashanti Ltd., AU, trading at $19.71 at 11.10 am EST on 29th November 23.

Posted at 11.15 am EST on 29th November 23.

The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stockmarket analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.