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Gold Action #420Dr. Clive Roffey 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.
 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 signaled 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. Apr 28, 2006 'Gold & Silver Penny Stocks' is the sister publication to 'Gold Action' and is produced by Dr. Clive Roffey; croffey@mweb.co.za
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