-- Posted Sunday, 25 January 2004 | Digg This Article

As far as I am concerned the most important chart in the precious metals book is that of the Rand price of gold. It is widely believed that this is the governing factor behind the movement of the South African gold shares. The Rand price of gold determines the earnings of the mines and hence impinges upon the actions of the share prices. Thus South African gold stock watchers tend to myopically view the Rand price of gold as the be all and end all of gold share analysis. In this issue I show that the next phase of the gold market is unlikely to be determined by the earnings of the gold mines in Rand but more likely to be due to powerful demand for gold shares in what is the most illiquid and tightly held internationally traded market.

All my data indicates that the gold stocks are brewing up for an explosive move through until the end of March area. The Rand price of gold is looking like a move to R3 800 per ounce. This translates into R120 000 per kilo for the mines. At that level it will be like printing money for the mines and the share prices will go ballistic. I am extremely bullish on the performance of gold shares for the first part of the year.

Most analysts have an Elliott wave count that dictates the probability of a fall back to $370 on the gold price. My analysis is totally different as I outline in this issue. I am looking for an explosive forward move in the $ bullion price through to at least $460 in the near term.

In my work we are into an accelerating gold market, not a correcting one. So stay with those electric gold stocks, especially DROOY. I have often detailed the upside potential of this marginal mine. It is one of the top ten producing mines. It was with great interest that I noted Merrill Lynch rating it as a buy. What took them so long?? I continue to rate this as my favourite gold stock for the next up leg of the market. I do not see the value in buying some speculative developer when I can buy one of the top ten producers and obtain the same leverage. I reiterate my comment from the last issue. Many of these gold stocks will pay dividends equal to today’s share price before the end of this long term bull run. So I reckon that I am getting the stock for free!! Goldfields is in the same category.

The platinum stocks are moving. I have already analysed that Palladium will outperform Platinum and recommended arbitrage switching between the two metals. The South African platinum stocks are probably the only shares in the world that will benefit from a price surge in Palladium.

Silver continues to excite. My short term target of $6 was achieved and the metal corrected. I am looking for the next phase in silver up to the $9 level as a major move. At $9 I am probably looking for profits.

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“Gold Action” is a fortnightly commentary on global gold and precious metal markets produced by Dr. Clive Roffey, Johannesburg, South Africa, a leading professional independent commentator on gold markets since 1969.

-- Posted Sunday, 25 January 2004 | Digg This Article

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Gold Action is a fortnightly commentary on global gold markets produced by Dr. Clive Roffey who has been a leading independent commentator on gold markets since 1969.
Dr. Clive Roffey, Gold Action

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