ARTICLES

Gold Resistance

All investments throughout the world can be ranked on a scale from high risk to low risk. As a general rule, in the world of investment, risk and return rise together. In other words, as the risks in an investment increase, so does the return necessary to attract investors.

At the one end of the scale there are very low risk investments like US Treasury Bills which offer a very low return but are seen as being very secure - and at the other end are investments like limited partnerships in oil exploration, especially those located in emerging markets.

Of course, the most secure asset of all is physical gold – and, as you would expect, it pays no return at all - so the only reason to hold gold as an investor is security. It offers no other benefit.

Because it offers no return, the international gold price can be regarded as a barometer of the level of perceived geopolitical risk in the world. When investors feel insecure, they move some or all of their assets into gold – and vice versa.

At the same time, the gold price is also a measure of the strength of the US dollar. When the dollar is perceived to be weak then the gold price rises and vice versa.

For the past 24 years, the gold price has been rising in US dollars. From a geopolitical perspective, it began rising after the 9/11 attack on the World Trade Center in 2001. Since then, the central banks of the world have been steadily accumulating gold and reducing their exposure to US Treasury Bills.

The US dollar has also been weakening against a basket of world currencies like the euro, sterling and the Japanese yen. That weakness has become more pronounced this year, especially since Trump took office and began to disrupt international trade relations.

In our Confidential Report of March 2024, we drew attention to the fact that gold has broken up through resistance at $2060 per ounce. Consider the chart:

After the upside break through $2060, the gold price entered a strong new upward phase which lasted until April 2025. At that point the metal has once again encountered resistance at about $3424.  Consider the zoomed-out chart:

For nearly 4 months it has been bouncing that resistance level testing it 4 times (the red arrows), each time falling back before trying again. In August 2025, it is again rising towards that resistance level. On Friday the 8th of August 2025, gold again rose above $3400.

In our view, the forces driving gold up are still in play. Geopolitical tensions in Ukraine and the Middle East continue to rise and Trump is continuing to preside over the general weakening of the US dollar against other major currencies.

Technically, what we know is that if the resistance at $3424 is convincingly broken then gold will enter a new upward phase – probably very similar to the upward phase it was in between March 2024 and March 2025.

Of course, a rising gold price is good for any country that produces or holds gold. South Africa does both. Gold shares have always out-performed the gold price because they are typically highly leveraged. In the past we have drawn attention to Harmony which has gone up 186% since we added it to the Winning Shares List (WSL) on 16^th November 2023. We are expecting gold to continue to surprise to the upside.

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A BIT OF HISTORY

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