Gold Action #449

Dr. Clive Roffey
Nov 12, 2007

In the last issue of Share Action I detailed that "While the Boks ground out their gutsy win the gold market also ground out a base pattern and is ready for championship lift off."

Bullion was battling to break through the $770 resistance, but as expected took off to move within a whisker of the all time $852 high of Jan 16th 1980. This is a massive bull market and any pullback in the bullion price should be used as a buying area. I am not looking for any serious corrections and expect to see the price smash through the 27 year $850 barrier in the near future. Who cares what is driving it as long as it performs.

That bastion of charities, the Mandela Children's Fund, has been tainted by the arms kick back scandals. Frankly I have often wondered why this charity needs a multi million headquarters in Rosebank, especially after spending millions renovating what were already good offices. I also have often wondered what a truly independent audit of this tugger of global philanthropic heartstrings would reveal about the Mercedes that to and fro through the front gates, face lifts and overseas trips. But still I suppose charity does begin at home!!

The Serf Efriken gold shares have been lagging for a long time but are at last showing some signs of awakening. DRD, that former dog of a gold share, is now the front runner in terms of relative strength and the other laggards are finishing their slumbers. Anglogold needs a break above R305 and Goldfields a push through R130 to overcome their resistance levels and to kick start a serious bull trend. Yes it has been frustrating watching the US gold shares add 100% in some cases while the local boys paid more attention to the rugby. But the move appears at last to be upon us. All the relative strength data is turning positive after 18 months of doldrum performance.

Continue to watch your relative strength charts as this is where the big profits will be made in the coming months. I continue to maintain that relative strength is the most important technical tool in the analyst's armory.

All the precious metal prices have been forcing their way forward, even silver has pushed above its recent resistance while platinum broke through its $1350 resistance some time ago. It is now the turn of palladium to join the push above resistance party. Aluminium and nickel have based out and oil continues its charge. The Rand has been strong but is finding it very difficult to break under R6.40.

I remain, as I have been for the past three years, a commodities bull. I have no negative data on any of the precious metals and believe that it is the turn of the JSE gold shares to play catch up with their offshore counterparts.

Although the Banks had a boost with the Chinese interest in Standard Bank the main relative strength play remains focused on the metals and commodities arena.

	The Euro / Dollar has been the dominant picture for the past few weeks as the sub prime farce affected confidence in the dollar. The weekly chart shows that the MACD in the top frame and RSI in the bottom frame are making new highs with the Euro indicating a stable bull trend. My upside count on this data is to E1.53 for the dollar. In the short term trading there are likely to be some minor blips but the longer term trend remains bullish in favour of the Euro
	The Euro / $ daily data indicates a period of breathing as there are sell divergences on both the MACD and RSI frames. I would expect a period of short term consolidation in this data prior to a resumption of the longer term bull trend for the Euro.
	The Gold $ price in contrast has its MACD and RSI making new highs along with the metal price highs. This implies a stable bull trend. The implication of this data is that the gold price is not only going to be influenced by the currency machinations and that other forces are about to come into play to maintain the bull trend. This same data plies to all the other gold charts in the various currencies.
	Gold in Rands had a large three year correction that ended with the breakout from the triangular pattern in 2005. More recently it has formed another flat top triangle from which it has just pushed upside. This is a strong breakout and one that should continue.
	Brent Crude has also seen its MACD and RSI oscillators move to new high ground with the price on its longer term weekly charts. Once again this indicates a stable bull trend. Sure there are going to be some short term scares and reactions but the long term upside trend remains intact.
	Copper is still bouncing along under the critical and powerful selling resistance at $8400. I maintain that a break above this resistance will trigger an upside count to $11 000 for this metal.
	JSE Gold Index pulled back to a perfect Fibonacci 61.8% retracement. It is ready to bounce substantially. In addition the pullback took the shape of a flag pattern that implies an upside count to a target of 3150.
	JSE Gold Index on a slightly longer term picture has a main resistance at 2800. But a reverse head and shoulders has developed after the original divergence buy signal. The flag pattern referred to above is the right shoulder. This is a very strong chart with powerful upside potential. It looks as though, at last, the gold shares are about to play catchup.
	JSE Gold Index has also developed a strong buy divergence on its blue relative strength data against the JSE Overall index. This implies that the gold shares are not only ready to make up for lost tioem but will also accomplish this effect in a superior relative strength mode.
	The FT gold index is shown relative to the Dow. It is clear that a 20 year downtrend has been broken and that a new bull period in which gold shares will out perform the global equity markets has arrived with a vengeance.
	Gold $ is also ready for a boom move against platinum. This implies an acceleration of the gold price and a superior performance to platinum going forward. Gold has basically out performed platinum since the low of 2004 on the blue data but this chart indicates an acceleration of that performance differential.
	Silver has also broken into a strong bull trend with its RSI confirming all the recent highs. This indicates a stable bull trend. There are no signs of any divergences. Silver also has a habit of pushing well above the 80 level on the RSI and it is not near that danger point yet. This is a strong bull trend.

Nov 8, 2007
Dr. Clive Roffey
Johannesburg
South Africa
email: info@utm.co.za
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"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.

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