Gold Forecaster
- Global Watch
Gold - Where to now + Political
Risk assessment
Julian D.W.
Phillips
Gold Forecaster snippet
Mar 15, 2007
- Below is a snippet from the
latest weekly issue from www.GoldForecaster.com
The Technical Picture
of the Gold Price:
The Gold Bullion Price
expressed below is the price defining those of the Futures /
Options / and Exchange Traded Funds, representing a portion of
an ounce of gold. The $ price of gold is the one all market
operators relate to, due to the $'s position as the present global
Reserve Currency. Each Producer receives his income from gold
in his local currency only as the host government of the mines
exchange the income for local currency. Likewise ndian, European,
et al, buyers of gold use their own local currencies when buying
gold. Gold Forecaster, tracks the gold price
in the different currencies.
U.S. Dollar Gold
Price
The Long-Term Technical
Picture of Gold: Looking to Target $730+ in 2006
The long-term prognosis remains
bright. Gold exceeded $675 resistance and moved to nearly $700
before making a sizeable fall with the general markets recently.
With gold exceeding some key technical resistance before the
correction, it has moved into a position so as to be ready to
move much higher once this consolidation is over. This correction
only put a short-term dent on the move up, allowing those to
still enter below the $650 gold price before the market makes
a move to and past the prior $730 record highs.
Terrific support is seen in
the low to $600's, the market is making higher highs and higher
lows since the lows around $250. The next major upside objectives
remain $730, then $850 followed by $1,000.
As the market presents this
pullback to us, continue to view it is an opportunity. The weekly
charts continue to project extreme bullishness and this pullback
is a healthy period of consolidation before the next objectives
higher!
The Short-Term Technical
Picture of Gold: Consolidation
With the breakout past $676
to $692 and the violent fall back to $634, we received the expected
bounce. We need to go through a period of consolidation until
a firm foundation is made for the move up, drifting higher before
we can see a resumption of the rally to $730. $655-660 remains
a good area of resistance; a close above this is needed to retarget
$675/$676 then $690-700. For now, good support is seen below
and any moves below $650 appear to be quite a good risk/reward
short-term play.
$700 then $730 remain upside
targets and with the action over the past few months, the market
is showing us that it is only a matter of time. If the market
snaps back in the next week or two, then we will be in good shape,
otherwise a period of consolidation - as mentioned above which
now appears to be most likely. Volatility has been quite high
and will remain with us, although it may settle down from the
levels observed in late February into early March.
Pullbacks
are very attractive at this time!
Political risk
We have often written
about the political risk facing miners in the emerging countries
where most of the world's gold is mined. We began to alert
Subscribers ahead of most of the dramas seen in these countries,
so we thought it appropriate to encourage you to see that many
company's are soundly based and able to contain political risk,
with the major proportion of their production outside the high
risk areas.
The Fraser Institute rates
political risk in different countries and have recently published
this years Policy Potential Index, measuring the best and the
worst levels of political risk. The Democratic Republic of
the Congo is the world's best mining locale, provided all remains
as it is now. If memory serves us well this country in the
last 50 years has seen one of the worst civil wars in history
[remember Biafra / Katanga?]. Well under a 'democratically
elected' government indicating a 'peaceful future' the institute's
findings in its 2006/2007 report ranks the DRC 57 out of 65 in
terms of policy potential index (PPI). In the 2005/2006 version
of the report, the Fraser Institute said the DRC was the third
least attractive mining destination.
In essence, the PPI is a composite
measuring a host of metrics including political stability and
bureaucratic consistency.
Zimbabwe ranks last, again
as it should. Zimbabwe has been last since the 2004/2005 reports,
and in 2005/2006 it reported the lowest ever points since the
survey began in 1997. [We are surprised it has ever scored
any points at all]
But in line with prospects
for Africa in general, most of the African countries polled are
getting lower rankings year-on-year. Remember that Africa remains
Africa, with its inadequate infrastructure, political greed and
change a continuous problem.
Botswana, Burkina Faso, Ghana,
Mali, South Africa, and Tanzania have become less attractive
to mining companies year-on-year. In the main it appears that
their sin is on the bureaucratic and taxation fronts. An example
of this is Zambia, but in the light of seeing the huge profits
of the copper miners, which African country can resist upping
taxes even on a 'windfall basis'. Zambia's government said
royalties on mineral sales would be unilaterally increased to
3% from 0.6% regardless of whether a stabilization agreement
had been signed with the investor.
To emphasize the potential
that exists in the DRC, the Fraser Institute provides a 'room
for improvement' metric. On this scale, the DRC has the fourth
biggest scope of improvement behind (in order of ranking) Russia,
Mongolia and Bolivia.
So check the countries your
investments mine in and weigh them against the total for the
company to gauge your risks.
Please subscribe to www.GoldForecaster.com
for the entire report.
Mar 14, 2007
-Julian
D.W. Phillips
email: gold-authenticmoney@iafrica.com
321gold Ltd
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