Seeking Value in Resource Stocks

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A survey of investment fund flows among more than 800 listed resources stocks across the world, measured on a rolling 12 month basis, suggests that gold and silver stocks may be overbought at this stage...At the other end of the scale, copper and aluminum stocks appear to be heavily oversold,

...Given general global market mayhem, on a sour cocktail of the widening credit markets crisis, and a slowing global economy, investors and consumers are disenchanted, to say the least. However, early trading in London and across Europe on Tuesday morning suggested a possible change in sentiment, despite unresolved US plans to bail out toxic debt in that country.

Poor sentiment has damaged pricing of virtually every kind. Commodity prices remain mostly on the slide, dominated by oil, which posted all time records on 15 July 2008. Among precious metals, the platinum group has been battered: platinum, palladium and rhodium are trading at 50% and more below highs seen around March this year...

A survey of investment fund flows among more than 800 listed resources stocks across the world, measured on a rolling 12 month basis, suggests that gold and silver stocks may be overbought at this stage. Prices for listed potash and also coal miners have been holding up relatively well, but commodity prices in those markets remain neutral to strong, given the relatively inelastic nature of demand for those commodities.

At the other end of the scale, copper and aluminum stocks appear to be heavily oversold, given the relatively encouraging performance of dollar metal prices for copper and aluminium. Miners, developers and explorers of and for uranium remain oversold, but could remain in such territory until the dollar uranium price shows firm signs of emerging from the doldrums.

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