Gold’s erstwhile safety-net status, a store of wealth when everything else goes wrong, has significantly dimmed in the past eight months despite the growing intensity of the Greek tragedy. As the dollar gold price dipped, the greenback climbed onto the throne, subjugating other currencies, particularly those of countries sharing our emerging market status. In the past 4 months both the rand and the dollar gold price have dipped 8% against the dollar which, as its value depends on this combination, have lifted the rand gold price by almost 4%.
Assisted by calls for the nationalisation of mines reducing to a whisper, the gold share index has risen by 15% in the past six-weeks but has a good way to go before it moves back into its long-lost bull trend. However, Krugerrands and Newgold, which accurately dog the rand gold price, are both a whisker away from new bull trends. Both have given buy signals with strong upward breaks through signal lines by their moving average convergence/divergence MACD plotting. There have been three similar upward breaks so for this year but lacked the thrust of this latest one.
In the right circumstances, mining shares can be good to investors, but what they are buying is gold that has yet to be mined. Mining is a risky and costly business with expenses rocketing as the energy needed for extraction zooms in price. Alternatively investors can buy Krugerrands fabricated in already mined gold, or Newgold EFTs each one equalling one-hundredth of an ounce of mined gold.
For the chart I have used candlesticks to indicate the dollar gold price’s movements over the past year. It shows that the price is back to where it was a year ago. However, because of the rand’s declining value the rand gold price, the red solid line plotting, has gained 29%. For all if this year, the third plotting, the MACD, has been moving upwards as it attempts to move back into positive territory above the horizontal line.
Technicals indicate that the rand gold price is likely to continue hardening, as the rand loses further ground and gold regains its hedging role as currencies other than the dollar, are undermined by a possible Greek departure from the Eurozone.