On 24th June 2019 we published an article under the heading “New” in which we drew your attention to the fact that the US dollar price of gold had broken up convincingly above at around $1340. Below is the which we included with that article.
You can see here the clearabove the upper resistance line in the “ ” in gold. That gave a clear signal that the period of movement which had lasted for six years was over and a new upward was about to commence.
Over the year which has followed the price has surged to $2061 – a gain of 54%.
For South African, that gain has been amplified and extended by the 21% fall in the rand/dollar over the same period. Together these two effects have resulted in a massive surge in the price of gold shares. Consider the chart of the gold over the same time period:
At the time that our article was published (24-6-19) the JSE gold index was at 1998. It closed last night at 6507 – a gain of 225,7% in just over 1 year.
What is the cause of this massive surge in gold shares? The underlying cause is the expected fall in theof paper following their continuous (in the form of record low and ) in the ten years after the of 2008. This has now been further extended by the extraordinary in response to the corona pandemic which has seen a widespread resumption of quantitative easing and a return of effective interest rates to zero in most countries.
Smart investors are aware that you cannot expand theso radically without debasing it. Added to that, there is little incentive to hold because they are offering negative . This makes gold the obvious choice for the protection of wealth.
The massive monetary stimulation of the world economy over the past decade will, in our opinion, result in an economicof monumental proportions over the next few years. That will certainly be accompanied by rising inflation which will be very difficult for to contain.
This means thaton world markets (including the JSE) are going to continue rising, including gold shares. In our article we suggested that the upside break in the dollar price of gold “could represent an opportunity for ”. Today, after a 225% gain, we are saying that the opportunity is not over – it has just expanded to include almost all high-quality .
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