INDUSTRIAL commodities and mining stocks are a good place to invest at the moment according to market analyst Martin Pring.
Mr Pring, who was in Perth recently to deliver an investment seminar, is a believer in the principle of technical analysis – the attempt to bring ‘science’ to the apparent chaos of the share market.
He told Business News his approach was to look at how the financial market revolved around the business market.
To do this, Mr Pring created three models based on stocks, bonds and industrial commodities. Each model has both a boom and bust phase.
By seeing where each sector is in its cycle, he considers educated investment decisions can be made.
Mr Pring said that, at present, both stocks and bonds were in a deflationary cycle while industrial commodities were looking strong.
This time, however, he indicated that the rise of commodities had been unusual.
“Since the 1970s, a rise in commodities has been traditionally led by a rise in the gold price,” Mr Pring said.
“However, now the gold price is weak. If the gold price rallied there would be a stronger jump in commodities.
“If the gold price stays below $260 per ounce, the commodities sector will be deflationary.
“However, if the gold price goes above $310, we should see something of a boom in mining stocks.
“Mining and gold stocks are hinting they want to break out but it is frustrating waiting to see what happens with the gold price.”
Mr Pring said there had been occasions when all three of his models were in deflationary cycles at the same time.
“However, that’s usually very short lived. It usually lasts about three months tops,” he said.
“When stocks and bonds are down and commodities start heading south, interest rates usually start to go down.
“When interest rates are going down, the bond price starts going up and that sector starts to take off,” he said.
