Gold: Strong Nerves and Patience of Ten Men
The past week witnessed rather volatile trading in gold bullion as the price declined to the 50-day moving average ($1,369), thereby retracing 62% of its three-week advance from the middle of November to early December. (Read more about Fibonacci retracement numbers here.) It will be very bullish for gold to hold these levels, but failing that it will take a decline below the November reaction low of $1,337 to indicate a larger correction.
Source: StockCharts.com
The point-and-figure chart also indicates $1,330 to be a critical support level. (On a P&F chart price movements are combined into either a rising column of X's or a falling column of O's, with each column representing either an uptrend or a downtrend. These charts eliminate the insignificant price movements that often make bar charts appear "noisy", removing the often misleading effects of time from the analysis process and making it much easier to recognize support/resistance levels.)
Source: StockCharts.com
Considering weekly data, it is shown clearly that gold remains in a very consistent uptrend. Although the lower boundary of the rising price channel indicates support only at $1,240, one should not lose sight of the upper boundary occurring at about $1,155. Once gold has completed its nascent correction, the yellow metal could therefore see a fairly sharp advance.
Source: StockCharts.com (hat tip:
Arthur Hill)
The final words go to Richard Russell, La Jolla-based writer of the 52-year old Dow Theory Letters: "I'm looking at gold as 'the last man standing'. Since gold is pure intrinsic wealth and it is outside the system, it can't go bankrupt and it can't go down to a level of zero value. In [an era] of deleveraging and deflation and slow growth, I'm picking gold as the best safe-haven. If you have a better idea, send me an e-mail ...
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Author: Prieur du Plessis
Dr Prieur du Plessis
investmentpostcards.com
With 25 years' experience in investment research and portfolio management, Dr Prieur du Plessis is one of the most experienced and well-known investment professionals in South Africa. More than 1 000 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns. He also published a book, Financial Basics: Investment, in 2002.
He holds the following degrees: BSc (Quantity Surveying) (Cape Town), HonsB (B & A) (cum laude) (Stellenbosch), MBA (cum laude) (Stellenbosch); and DBA (Doctor of Financial Management) (Stellenbosch).
Prieur is chairman of the Plexus group of companies, which he founded in 1995. Previously he was general manager: portfolio management at Sanlam, responsible for the management of investment portfolios with total assets in excess of $5 billion.
Plexus is a pioneer in the mutual fund industry and has achieved a number of firsts under Prieur's leadership. These include the authoritative Plexus Survey, a quarterly analysis of the consistency of the performance of unit trust management companies, the Plexus Offshore Survey, the Plexus Unit Trust Indices, and the PlexCrown Fund Ratings.
Plexus is the South African partner of John Mauldin, American author of the most widely distributed investment newsletter in the world, and also has an exclusive licensing agreement with California-based Research Affiliates for managing and distributing its enhanced Fundamental Index™ methodology in the Pan-African area.
In 2001 Prieur received the Santam/AHI Business Leader of the Year award for corporate leadership, business acumen and entrepreneurial flair. He was also profiled in the book South Africa's Leading Managers (2006). Plexus received the AHI/Old Mutual Enterprise of the Year award in 1997 and was also included in the book South Africa's Most Promising Companies (2005).
Prieur is 52 years old and lives with his wife, TV producer and presenter Isabel Verwey, and two children in Welgemoed, Cape Town. His recreational activities include long-distance running, motor cycling and reading. He belongs to the Cape Town Club, Johannesburg Country Club, Gordon's Bay Yacht Club and Swiss Social & Sports Club.
Copyright © 2008-2012 Dr Prieur du Plessis
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