Pick up some gold and profit

In last week’s piece, I attributed a lot of gold’s predictability to the auspicious and exuberant gold-buying seasonality of India.

This year, however, there are “other factors” at play which could help boost the yellow metal’s price.

The way I foresee the rest of this year playing out, this may just be the perfect time for the local “do it yourself” trader or investor to buy the NewGold exchange-traded fund.

This instrument trades on our exchange and tracks the gold price, which obviously trades in dollars and converts it into a rand-denominated tradable instrument.

This ETF (exchange-traded fund) trades just like any other listed share on the Johannesburg Stock Exchange.

Let me tell you why I think it may not be such a bad idea to pick up some NewGold until January.

Besides the Indian gold-buying season this year, there exist other factors which could be potentially beneficial for holders of the NewGold ETF.

The month of October tends to be quite a volatile month for stocks.

Stock volatility generally sees some investor flight to safe-haven assets like gold.

This means that if gold goes up, the NewGold ETF will get support from the rising gold price.

2016 is also slightly different to the previous three years since Barack Obama’s second inauguration in 2013.

This year is a US presidential election year and the uncertainty of who will take the world’s top job should see markets and currencies swing violently in this period leading up to the result.

Again additional volatility should bring out some more gold safety seekers.

This could also be good for the gold price and equally good for the NewGold ETF.

Where I see the kicker, though, is right here at home.

We’ve seen the rand stabilise since the Hawks’ case against Pravin Gordhan fell on its face.

Now a stronger rand is not good for the NewGold ETF, but don’t expect this to last much longer.

I have a suspicion that as we approach December, the fear of the possibility of Moody’s, Fitch and Standard & Poor’s downgrading South Africa Inc. is going to cause short-term havoc with the rand.

In particular, I think the probability of rand weakness leading up to December is very high and we could see the rand weaken significantly against the US dollar.

The combination of a weak rand versus the dollar and a rising gold price will act as a double whammy for the NewGold ETF.

The way I see it, both global and local economic factors favour a punt on gold and in particular the rand-sensitive Newgold ETF.

Don’t forget to register for my free “DIY Investing” seminar.

This one is for locals only and I am keen to meet my readers.

So, if you are interested in trading or investing the “do it yourself way”, simply email to benonicitytimes@caxton.co.za to book your seat and I’ll give you more details.

Also read:

It’s October and it’s a significant month for gold

Dig your investor claw into any country

The enigma around September stocks

Refine the way you think about oil

Follow us on these platforms:

Like our Facebook page and follow us on Twitter.

For news straight to your phone invite us:

WhatsApp: 079 431 2006
Instagram: benonicitytimes.co.za