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Gold is definitely not your safe haven in South Africa

by Timon Rossolimos


South Africa might have been the world's biggest gold producer, but not anymore! 

 
In 1970, South Africa produced over 67.7% of the world's gold production.
 
But now it's dropped down the scale, to number six!
 
And today, South Africa produces only around 7% of the world's gold.
 
This is shocking! And doesn't look like things are going to change soon
.
With our Gold production dropping and the costs of mining sky rocketing, this isn't doing us justice for our gold investment decisions.
 
And looking at the Gold Mining Index, I'm expecting it to drop at least another 30%.
 
This will be the lowest levels since 2001.
 
Gold stocks are definitely not a safe haven in South Africa. So best, you leave them out of your investment portfolio.
 
Here's why!

It's never traded this low in the last 12 years!


The gold production in South Africa has fallen to the lowest levels since 1905, this is definitely not a good sign if you want to invest your hard earned money into South African gold shares.

Go and look up any gold share on the JSE main board, you'll see their prices have dropped drastically since 2002.

The Gold Mining Index is basically comprised of the major gold mining companies in South Africa.

And when the main gold shares drop, the Gold Mining Index follows!

Well I've been watching the Gold Mining Index trade in a Twilight-Zone pattern for a while now…

And looking back, it's been trading in this formation for the last 12 years!

The Twilight-Zone is one of my favourite profit patterns which I use when I trade. 

You can think of it as a big rectangle pattern where the price moves up and down in a 'box'.

And when you look at the Gold Mining Index, you'll see it's been trading in a range.

Take a look at the chart so you can see what I mean…


Timon Rossolimos, Prediction, Mining index

So as you can see in the above chart, it's been bumping up and down the two red lines.

The range has been between 3282 points and 1376 points.

But now has broken to the downside!

And looks like it will drop another 30%.

This means that we could be seeing a whole lot more downside!

In fact, I'm expecting the price to drop from where it is now (1146 points) all the way down to 800 points.

So all in all, there's no way I'll be investing in gold shares!

So, must you cut ALL gold investments out of your portfolio completely?

Absolutely not!

The international gold price and gold stocks overseas have very little correlation with each other.

While the gold price was making all-time highs in 2011, the South African Gold Mining Index was still hovering between those two levels (see in the above chart).

So, to sum it all up…

Stay away from any major South African Gold shares which are listed such as Anglo Gold, Harmony and Gold Fields until you see a miraculous change in the trend.  

Always keep in mind

'Wisdom Yields Wealth'

Keep well and always remember,

'Wisdom yields Wealth'

Timon Rossolimos 
Editor, Trading Tips
 


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Disclaimer:

Copyright 2016, Fleet Street Publications (Pty) Ltd. The information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. No action or inaction should be taken based solely on the contents of this publication. We do research all our recommendations and articles thoroughly, but we disclaim all liability for any inaccuracies or omissions found in this publication. The past is not a guide to future performance. Trading derivatives on margin carries a high level of risk, and may not be suitable for everyone. Before deciding to trade any type of derivative instrument you should carefully consider your investment objectives, level of experience, and risk appetite. Remember, you could sustain a loss of some or all of your initial investment, which means that you should not invest money that you cannot afford to lose. If you have any doubts, it is advisable to seek advice from an independent financial advisor.

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