-- Posted Monday, 1 May 2006 | Digg This Article
Our heartfelt condolences go out to the Goldin and Bloom families and we wish them a long life. The cold blooded senseless execution style murder of Brett Goldin and Richard Bloom just for a car has shocked the whole of South Africa. If ever there was a case for bringing back the death penalty then this is it. If there is any justice these murderers will go to prison, where they will remain alive, have three meals a day and TV and all at our expense!!! Why should the tax payer be responsible for these ruthless murderers? Frankly their families should be forced to foot the bill for their future existence. What about hard labour as a punishment for such heinous acts if the bleeding hearts cannot stomach the death penalty?
Welcome to South Africa ….. land of the highest murder rate, highest rape rate and world leader in the HIV pandemic. What a tourist attraction and wonderful public image!!
At least the gyrating gold price has offered some relief from the soul searching events of the past week.
My target of $635 was achieved and since then the price has vacillated wildly around this fulcrum as it smashed above the $640 level in the next bull attack towards the $685 level. This remains a fully fledged bull market.
I have been consistently bullish on the gold price since the $252 bottom in the gold price, apparently much to the chagrin of Moneyweb. I dissociated myself from that old radio programme in 2002 as I found the constant snide comments to be out of keeping with a supposedly factual business programme. It appears that they have still not learned their lesson. If my gold analysis is to be examined it should be done so in the context of comparison with the Moneyweb share price. My gold share selections and analysis has yielded profits for many investors and traders, unlike the Moneyweb share price that lost 90% of its 208c high of 1999. And after seven losing years is still languishing at 25% of its first trading level. Talk certainly is cheap, especially when associated with a decimated share price. Radio commentators would do well to remember that for every critical finger you point at someone there are four pointing back at you!!
The gold shares are still hovering at resistance levels that need to be broken for the bull trend to resume its progress. I continue to detail that the gold shares MUST break WELL ABOVE their 2002 peaks before the wave III of the bull trend can be anywhere near reaching completion.
I find that one of the most interesting items of gold analysis is the penny stock performance. These are primarily the exploration and development groups with very little or no production. They are the classic speculative shares. As you know we produce a weekly analysis of penny stock gold and silver shares primarily in North American markets and also Australia. For the past few years many of these penny stocks have been forming massive bases from which they are just starting to emerge. Large upside potentials do not occur in these stocks until the market is well into its bull run. Historically the big gold producers are the first to move in a bull market. The more marginal mines take over the running once the bull is established and the penny stocks are the last to enter the market when it is already a mature bull. Only when there is euphoria in the penny stocks will this bull market in gold and silver shares become dangerous. There is still an air of disbelief surrounding the penny stocks and that reassures me that we have a long way still to ride.
Several Elliott analysts are indicating that this is the final bull leg of the gold run. They indicate that the correction from $185 back to $102 from 1972 to 1974 was the I-II and that the 21 year correction from 1980 was the III-IV. I have a problem with this assumption. I cannot put the 2 year and 21 year corrections together as being of the same order. I find the 21 year correction as a bear phase to be a much higher order than the 2 year one. Thus I believe that this certainly is the final bull trend in bullion but that the duration is likely to be much longer than is generally expected. I look for at least another 3 years and maybe even a further 8 years.
Brent Crude was analysed in December as having the potential to hit $80 a barrel. It is almost there. The RSI in the bottom frame and the MACD in the top frame are both into overbought territory, but there is no sign of divergence. This implies a stable bull trend. Although I expect to see some consolidation of the price at current levels I must look for the $80+ area after this minor correction has run its course.
The Gold price chart is just starting to move. In previous years I detailed the flat top broadening pattern with its neckline at $430 and upside target of $610. This target has been reached and breached. The count from these patterns is a minimum. Very often the final move is a 2 or 3 times multiple of the original move. In this case a 2x multiple gives $770 as its target and a 3x factor as $970. These are pure conjecture at this stage. My point and figure daily chart indicates a first stop at $685. Let’s see what happens then.
The long term Gold price is in a huge bull market. Just look at those RSI and MACD oscillators. There is not a divergence in sight. This is a huge stable bull market. Note all the oscillators have made new highs along with the gold price. Although the oscillators are into overbought territory there is no panic selling likely.
Silver is in a stable bull market trend. I constantly detailed the huge triangular pattern on silver and the potentially huge upside. Both the RSI and MACD have made new highs with the share price and indicate a stable bull trend. BUT the most interesting aspect of this data is that Barclays have just received SEC approval for a silver Exchange Traded Fund to be launched on Monday on the American Stock Exchange with SLV as its ticker code. This will be a fantastic index to watch and an easy way into the silver market for both stocks and the metal as well as a good index of movement in the silver market.
The Rand Price of gold has been in a bullish mode since the breakout from the downtrend in 2005 that I often detailed. Note that the new highs on the chart have been matched by the oscillators thus indicating a stable bull market. My long term upside target remains at R5400 an ounce. Despite all comments to the contrary this remains a powerful stable bull market picture.
The Rand is at a critical juncture against the dollar. It MAY have formed a serious double bottom pattern over the past few months. There is a strong resistance at R6.35. But a move above the short term level of resistance at R6.20 will be a necessary signal for further Rand weakness. I look for a much weaker Rand to R6.85 if the R6.20 resistance is penetrated.
Prior to 1976 Momentum was the only available oscillator. The RSI and Stochastic had not been invented. The advent of Wells Wilder’s RSI effectively dumped the open ended momentum onto the scrap heap as analysts preferred using oscillators with fixed overbought and oversold levels. But it still has an outstanding role to play when attempting to decipher long term trends.
The gold price is shown, with its long term 52 week momentum oscillator in the bottom frame.
All the black lines indicate the area in which a buy or sell divergence was indicated. In fact every major market turn was detailed by a divergence. Even the 2003 to 2004 divergence heralded the effective sideways move in the gold price at the $430 level.
The red lines are the trend change lines on the momentum and their effect on the gold price. Trend lines can be applied just as effectively to oscillators as to share prices.
Once again every strong and obvious trend break signalled a clear change of movement.
Now look at the current position. Certainly the price is into overbought territory. BUT there are no signs of any divergence dangers or any trend line effects. Note that in early 2005 the momentum bounced off the 100 line. This indicated a very strong upside trend that would accelerate. How many times during the past year have I detailed a potential acceleration of the gold price? This is why.
The final aspect of this important but outdated oscillator is that there are no sell signals. There may be a corrective phase from an overbought position but this will lead to a further new high on the price before any dangerous divergences can set in.
