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Gold tipped to breach $330

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    Gold tipped to breach $330
    June 14, 2002
    Gold will test $330 per ounce again before long. Premonitions of gold's utlimate appreciation are not new to the market but the difference lately is that international analysts and fund managers of a variety of denominations appear to agree. Well-known gold bulls, such as Paul van Eeden, have been joined by cooler-blooded market commentators such as Deutsche Bank and Allan Gray, a South African fund manager which believe gold's retreat is a hiatus. On the technical side, Kobus Kotze of SCMB Securities, a South African broker, says that despite signals of short-term technical weakness, the long-term upside target is $340 per ounce.

    "The long-term gold price is still bullish with medium-term support at $317 followed by further resistance at $309. Only when $309 is breached on the downside does the bull trend change to a bear trend," Kotze said. While short-term prospects might appear sluggish, Kotze says his long-term upside target remains $340 per ounce should the gold price stay above $317. The gold price was last trading at $317.95 per ounce.

    Paul van Eeden, an analyst for US firm, Global Resources, says the future of gold is firmly hitched to the fortunes of the dollar. He does not see the dollar continuing to strengthen and therefore gold remains firmly in a bull market. "The inverse correlation between the US dollar and the price of gold is not just psychological, it is fundamental just like the price of all other imports," he said

    "As the dollar weakened, the price of gold in US dollars increased and the recent correction in the price of gold is due to the temporary support for the dollar based on Japan's intervention in foreign currency markets," he says. He believes, however, that the dollar will continue to weaken, a development related to worsening economic problems in the US.

    "Because of this I do not expect the dollar to halt its decline relative to other currencies and thus I believe that the gold price is still firmly in a bull market," he says.

    The speculative net long position in the Comex gold market fell by 9.2 percent from its highest level in seven years in the last week of May due to a 19.2 percent increase in short positions, Deutsche Bank said in a recent report. "However, more recent action suggests that the net-long has increased again and $330 per ounce is a very real target on the upside," the bank said.

    There are dissenting voices. Nick Goodwin, an analyst at SG Securities in Johannesburg, suggests that gold may try to breach $330 per ounce but it will be its last charge before a meltdown. "If you don't sell know you're going to pick up trouble," he said in a Miningweb report earlier this week. In the first week of June, there was an 8.2 percent fall in short positions which outweighed a 2.9 percent decline in the longs. There may have been another reduction in long positions as the gold price remained static.

    Stephen Mildenhall, chief investment officer for Allan Gray, a highly-rated South Africa unit trust manager, said the surge in gold equities earlier this week after being quiet for several weeks was a typical pull-back of a bull market. "I think you do see these violent pull-backs in a bull market and I think what one is seeing here is probably quite a long-term bull market in gold," he said. Mildenhall also saw further upside for South African gold equities: "I think if one has a bullish outlook for the dollar gold price, which I think we would tend to have, then I think that some of these gold shares are still very attractive," he added.

    S. Africa gold equities on roller-coaster
    Gold stocks on the Johannesburg Stock Exchange, however, continued to bounce around retracing some of Wednesday's impressive gains. The gold index was 7.8 percent weaker at midday with Gold Fields shedding 12.8 percent after gaining more than 20 percent the previous day. AngloGold was 4.28 percent weaker, Durban Roodepoort Deep and Harmony Gold were 7.78 percent and 9.54 percent weaker respectively. South Africa's gold index gained 14 percent on Wednesday.

    Source: Miningweb


 
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