The Market Promising to Double Your Money

The Market Promising to Double Your Money

Have you been watching gold stocks?

Gold priced in Aussie dollars closed at AU$1,763 overnight. Any further rise now and the cash could really start pouring into Aussie gold producers.

Nobody is more surprised to be writing about gold positively than me.

The outlook for gold didn’t particularly excite me at the start of the year. But the weakness in the Aussie dollar is delivering really good margins at the moment.

You could potentially get some very nice trades in if gold remains strong.

But the benefits of a strong gold price go beyond even this.

A lot of the exploration that happens in Australia is for gold. The more cash that pours into gold companies, the more sustainable this business flow becomes.

That’s potentially great news for the mining service companies and, naturally enough, the state of Western Australia, where most exploration takes place.

The outlook for Australia is a lot brighter when commodities are doing well.

But I think it’s going to get even better for Aussie investors…

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Oil has now hit its highest price level since 2014.

The energy market ran up into news overnight that US President Donald Trump will again impose sanctions on Iran. This is expected to knock out Iranian oil exports from the global market.

To what extent this happens nobody actually knows. Only time will tell. But it does add to the pressure building in the oil market.

The US Energy Information Administration just released its short-term outlook on oil. It revised its forward estimate for Brent crude up US$7 since last month.

That might yet prove to be way too conservative…

The Big Australian looking very good

It certainly puts BHP Billiton Ltd [ASX:BHP] back in the spotlight. A US$1 move in the oil price can change the underlying earnings of its petroleum division by US$64 million.

BHP could make a lot more money than anyone expects if oil can hold higher and the company hits its production guidance.

BHP has also made no secret of the fact it wants to sell or de-merge its shale oil assets in the US. The better the price and outlook for oil, the higher the valuation of these assets.

Who knows, it could turn into a blockbuster deal. That would give BHP’s management billions to bolster dividend payouts and engage in stock buybacks.

It could also give the Aussie market a big lift because BHP makes up so much of the index.

Don’t forget that iron ore and coal account for much of BHP earnings as well; both are holding up a lot better than most expected.

The last of the ‘big four’ minerals for BHP is copper. The copper price is down a little over the year, but BHP has said its overall production was up 37% at the end of March over the previous 12 months.

What’s more, the long-term outlook for copper looks very bullish. All this gives BHP a bright outlook from here, all else being equal.

This strength in commodity prices in general should make the Aussie market a happy hunting ground over the next 18 months.

There are so many mining stocks on the ASX with good projects.

Investor interest is likely going to swing back to commodity stocks because the gains that are starting to show up are too good to pass up.

The market sorely needs a bit of momentum. A trading mate of mine said there was a kind of malaise over the market in the first quarter. It wasn’t the easiest to navigate, that’s for sure.

But the ingredients are in place for the market to heat up from here…

The stage is set for a speculator’s paradise

Most likely, the worst of the news on the banks is out now.

They appear to be catching a bid because of the yields they offer.

Westpac’s results announcement this week was sturdy.

The Aussie economy is ticking over well enough to support the share market in general.

And now we have the natural resource sector throwing up some juicy opportunities.

And don’t forget the ultimate wildcard: cryptocurrencies. These are beginning to heat up again after a tough three months.

It’s interesting that the negative commentary around Bitcoin appears to have disappeared from the mainstream media.

There were plenty of people shooting their mouth off a few months ago about how Bitcoin was a bubble and fool’s errand.

Well, one Bitcoin still trades for over AU$12,000. That’s admittedly down from the high, but much more resilient than most expected. Some of the ‘altcoins’ are also beginning to show the rapid moves that defined 2017.

All told, if you’re looking for speculative opportunities, in my view, there are two markets worth keeping an eye on over the next six months:

One is cryptos.

The other is junior resource companies.


Callum Newman Signature

Callum Newman,
Editor, The Daily Reckoning Australia