When to buy resource stocks?

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When buying resource stocks (miners, producers, explorers, etc.), you are typically aiming to capture one or more of the following:

  • A commodity price up‐cycle (i.e., the price of iron‑ore, copper, gold, lithium, etc starts rising)
  • A recovery in demand (for example from China/Asia, infrastructure, energy transition)
  • A supply disruption or constraint (which boosts prices)
  • A valuation reset (when shares have been beaten down and are undervalued relative to fundamentals)
  • A sector rotation (investors move from other sectors into resources)

In other words: you want to buy before the broad rally takes off (so you get more upside), not after when the move is already baked in.

When to buy: Key timing signals

Here are the major conditions and signals that suggest a potentially good time to buy resource stocks.

Commodity prices bottoming or early in a cyclical recovery

  • When key commodity prices (e.g., iron‑ore, copper, gold, lithium) are showing signs of bottoming (or recently have bottomed) and starting to rise, this is often a good sign.
  • If resource companies are getting cheaper (valuation down) and commodity prices are recovering, it may be time to buy.

Global demand environment improving & supply constraints visible

  • Resources stocks do well when global demand is stable or improving — especially from large consumers like China or for commodities tied to the energy transition.
  • Supply constraints are also important: if exploration or production has been under‑invested and you start seeing shortages, that tends to precede price rises.

Valuation/price multiples are depressed and sentiment is poor

  • A good time to buy is when the stocks are out of favour, valuations are low, and investors are sceptical — because upside tends to come when things improve.
  • So if you see broad pessimism and the shares are beaten up, this could be an entry point.

Macro/FX/interest‐rate tailwinds

  • Resources benefit when interest rates are lower or stable (reducing discount rate), the USD is weak (raising commodity prices in USD and improving AUD‑export terms for Australian companies), and global policy supports commodities (e.g., energy transition).
  • If interest rates are on the way down, that may also help.

Lauren Hua is a private client adviser at Fairmont Equities.

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