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Gold ActionDr Clive
Roffey During the whole of the period from April to July I was detailing the gold market movement as a huge base at the end of an old correction and NOT the start of a new bear market. This analysis was scoffed at as, according to my critics, the rand was a dead cert to strengthen to R5.50 and the mines were going to make huge losses and even go bust. I refuted this hysterical analysis. I constantly detailed that the gold share charts had flat top broadening, megaphone or falling wedge base reversal patterns. I clearly indicated that once the bases had ended that a very sharp catapult in gold share prices was likely to occur. Well now you see what I mean! For the past three months I also disputed the mechanical assumption that a weak dollar MUST lead to a strong rand that would automatically cancel out any gains from an improving dollar gold price. I went out on a limb and stated that I was looking for a weak rand and stronger gold price, totally contra to the majority view. Once again you see what has happened. I was also roundly criticized for giving buy signals on the gold shares such as Goldfields from R80 all the way down to R54 where I classified the gold market as a 'once in a lifetime buy.' Again I detailed that once the flat top pattern on Goldfields had run its course there would be a very powerful upside catapult. This is exactly what has happened. In three weeks Goldfields has bettered all its losses of the past three months! And there is a hell of a lot more still to come. Let me reiterate my analysis so that there is no confusion. I believe that the gold share market has bottomed out at the end of the two year correction from the top in April 2002. I look to this next gold bull phase to be the big wave three that MUST, if Elliott is right, take the share prices well above the previous highs of April 2002. I am looking for the resource market led by gold shares to be the global market leader for quite some time. Now that bullion has broken above the minor resistance at $403 I expect to see an attack on the long term resistance at $430. This level is of extreme importance as for the past thirteen years it has capped any attempt by bullion to break into new bullish territory. I believe that there may be a minor hiccup at $430 but that the current bull phase will have enough impetus to move well above this $430 resistance. Durban Deep and Randgold are the laggards and still in major buying areas. I believe that DROOY is the buy of the century now that the rand gold price has moved to R87 000 a kilo, ABOVE the break even costs of the DROOY group. Last week I detailed several penny gold stocks. Now is the time to be buying into these highly speculative stocks with any spare cash. I also rated the leading silver stocks as huge buys in the last issue and they have all started to force their way off their recent bases into a new major long term bull trend. All the precious metals have moved into brand new long term bull trends. This is a major buying time to get into the leading gold producers, penny stocks and silver counters. A month ago I classified the gold shares as 'once in a lifetime buys.' Let's wait until the end of the year and review that analysis.
This is the most important chart in analyzing the South African gold stocks. I have previously detailed the buy divergence and the potential for a vertical catapult move off this huge base formation. The oscillator has already broken well to the upside. I am looking for a rand gold price of R3 600 an ounce. This translates into R115 000 a kilo. If the Goldfields and Harmony prices have flown on a move from R80 000 to R87 000 a kilo then just imagine what a move to R115 000 a kilo will do to their share prices. But the main beneficiary of such a move will be Durban Deep. As I have detailed in my last two reports the group break even for DROOY is R85 000 a kilo. So at Friday's gold price of R87 000 a kilo DROOY is into profit, NOT potential closure as the emotional amateurs were forecasting two weeks ago.
This is my Elliott wave analysis of DROOY. It also applies to the JSE Gold index and most other South African gold stocks. We have finished the major two year correction that started in April 2002. The new bull leg should take us into the huge wave III. According to Elliott this MUST push prices well above the top of wave I. I leave you to work out what this means to the Durban Deep share price! Dr. Clive
Roffey "Gold Action" is a fortnightly commentary on global gold and precious metal markets produced by Dr. Clive Roffey, Johannesburg, South Africa, a leading professional independent commentator on gold markets since 1969. 321gold Inc |
