The rand price of gold has been the key. It recently bounced off the support at R2570 and broke above both the short term resistance at R2650 and main resistance at R2700. This has triggered a short term count to R2900 and longer term to R3200. I warned that the gold stocks were all inside massive bases and that the recovery from these ridiculously oversold positions would be violent. Analytically the next problem is to assess whether the current upmove is just another rally such as those witnessed during the past year or is it really a major reversal out of the three year bear market into a brand new bull market. All my data indicates the new bull market prospect. This is especially evident on the oscillators on the weekly data.

When we have all the oscillators grouped at the top of their ranges it is a signal to be careful. Conversely when they are all grouped at the bottom of their ranges it indicates a potential buying zone. The gold stock oscillators have all been grouped at their lows in the buying zone for the past two months. They have only just started to lift off these low levels and there is no sign of any grouping at the top ranges. In fact most of the oscillators have not yet even crossed over the half way mark. This implies that there is a long way still to go before we have any worrying data. Strap yourself in and go for the ride it should last at least three to four months.

The same data applies to most of the resource stocks. For months I have been detailing the huge triangular patterns on both Anglo American and Impala Platinum. Last week they both crashed upside through their key resistance levels. This is not just a signal that these stocks are into a new bull trend but a confirmation that there is a new bull trend right across the resource stock sectors. Thus for those who have missed the first surge there is still time to catch up with some of the smaller movers.

In the last issue I detailed the Copper vs Gold chart and indicted that we were about to enter a period of domination by the precious metals over the previously powerful base metals. This implies that the two of the largest resource stocks quoted on the JSE and LSE have changed relative strength positions. For the past few years Billiton, the base metal and oil dominated stock, has well outperformed Anglo American, primarily a precious metal resource stock. The roles have been reversed and I expect to see Anglo American in the dominant strength role for some time.

Since the beginning of 2004 silver has been gyrating inside a major triangular pattern. But this pattern is about to break on the upside. A move above $7.30 will confirm the new upside bull move. Silver shares have been sold off but investors should hold and buy more as once this break occurs they will catapult and you will end up chasing stock. I like the silver price for a serious six months surge in price. Platinum also remains inside its flat top triangle with the resistance break still at $880. A move above this will trigger a serious upside potential.

Finally the dollar gold price has been range bound for the past three months whilst the Dollar has had a minor bout of strength. I am looking for the Dollar to top out in the near future and for bullion to resume its long term bull trend. It needs to break above the overhead selling resistance at $422 to trigger the breakout. There is an upside target of $485 still to be achieved.

Watch for the breaks of gold above $422, silver above $7.30 and platinum above $880.

Platinum remains trading inside the flat top triangle. But the breakout is imminent. The next upside surge should take this precious metal back up to at least $1000 an ounce. This is a potentially powerful chart and confirms the recent strength of the platinum stocks on the JSE.

Silver over the same period has mapped out a triangular pattern. Triangles usually lead to catapults once the breakout occurs as the tensions of the trading inside the pattern are released into a new trend and the fundamentals steer a new course. It needs a break above $7.30 to confirm the breakout and trigger the catapult.

Gold bullion does not have as well defined pattern as the other two precious metals. But the recent trading pattern over the past month has developed a resistance at $422. It will need a break above this to trigger the next upward surge. But if both silver and platinum are on the verge of substantial upside moves then gold will not be far behind.

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Dr. Clive Roffey
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29 May 2005