Update on Gold Position

In my gold update dated 14 June 2012, had a 20% buy at $1,616 and an accumulation of another 30% at $1,574 should it get there (with stop loss at $1,518).

On 21 June 2012, gold reached a low of $1,564, so our next 30% would have been bought. Gold fell as low as $1,547 on 28 June, and now sits at $1,598. Our stop loss was never activated.

I would buy another 20% now, at $1,598, taking the accumulated position size at 70% with an average entry price of $1,592.85.

Gold is consolidating well and our target of $1,708, which is 6.9% higher from here, remains. The stop loss at $1,518 also remains.

I thought I’d add a gold stock to the mix since many investors may not want to buy gold directly. (Read, How to buy gold)

Kingsgate Consolidated Ltd (KCN)

Kingsgate is capitalised at $733 million and operates a gold mine in central Thailand, with other interests in South Australia. It is a profitable miner.

I have an upside target of $6.08 or 22.6% for Kingsgate. The share price traded as high as $12.30 in October of 2010, and reached a low of $4.54 last Friday. It is trading at $4.96 as I write.

I had bought on Friday and at current levels, I would put a stop in at a close below $4.74.

What I like about the chart?

1. Last Friday’s low of $4.54 is a Fibonacci support. It held nicely.
2. There are divergences occurring on my charts, indicating a bottom. This is occurring on both daily and weekly time frames.
3. The bottom formation in the US dollar gold price chart is supporting the above two points.
4. The gold price chart 200-day moving average is beginning to flatten out.
5.  The 200-day moving average is a long way away from price action. At the bottom it was 43% below the 200-day moving average. A bounce should be coming.
6. Macro economic factors are indicating better prospects for a higher gold price.

What I don’t like

1. The 200-day moving average (the yellow line) is pointing down. The trend is against going long.
2. The weekly chart does not exhibit a convincing bottom.

Please note: my views are not for the long term. My method results in views expressed that relate to an outlook that lasts weeks or at most months. For example, my view on Shanghai’s Index has for now been met and completed since 22 March 2012, 11 days later. Currently in regards to Shanghai, I am in a cautionary observant position. Your utilisation of this information needs to take into account the time frame I set. The stocks recommended as ‘Steady as She Goes’ may be held for the longer term, which for me means months.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Anyone should, before acting, consider the appropriateness of the information in regards to their objectives, financial situation and needs and, if necessary, seek professional advice.