It’s just a gut feel at this stage, but along with other chartists, I’m keeping my eye peeled for a lift in the dollar gold price. The gut feel grows stronger each time I take a look at Europe, and see the mess it’s in getting stickier by the day. The worst case scenario would be a total collapse of the euro, which I don’t think could happen (my crystal ball is murky on the subject) but currency upsets automatically send people scurrying into gold. There are a few bits of good news coming out of the US, but while, at the moment, the dollar looks strong, the economy is still fragile. History doesn’t repeat itself but gold-bug spirits lift as we near the first anniversary of gold almost hitting $1 900.

Chartists are watching the mid-May to date sideways pattern in gold. Point-and-figure chartists are keenly watching for an upward break through the solid resistance that has built at $1 600 plus. If the break is strong enough, it may produce forward counts in excess of $2 000. But the three white candles seen on the far right of the chart excite me. This formation is known as ‘Three White Soldiers’ which signals a bottom reversal.

However, even more exciting is that Newgold has given a new buy signal with an upward break through its moving average convergence/divergence (MACD) potting. Newgold, which like the Krugerrand, mimics the rand gold price, is attempting to nudge back into a bull trend. It has just broken a double top on its point-and-figure chart that gives a possible count to R167,00. As the rand gold price depends upon two components, the dollar gold price and the value of the rand against the dollar, the fortunes of both dictate its value.

Why Newgold rather than gold shares or Krugerrands? Some gold shares distribute dividends, but, at this point of time, that appears to be their only advantage. Nationalisation scare-stories detract from investment while costs for the still-to-be-mined gold, are in a upward spiral. Gold, fashioned into Krugerrands are highly attractive objects, but only a brave investor would keep them on hand to be constantly admired. The investor can well keep his physical gold, rarely seen, tucked away in a safety deposit box, along with the 1,3-million fine troy ounces of gold bullion held in Newgold’s depository storage in London.

Newgold ETF continually tracks the price of gold bullion on international markets by holding physical gold bullion equivalent to the value of the securities in issue. At last week’s close the rand gold price was R13 217,06 an ounce, which left Newgold (about one percent lower) at R128,50.

Jean Temkin

(Click on the chart to see it more clearly)