Reid,
In trying to continue my education in TA and some of your theories, I was wondering about your take on DROOY.
DROOY is actually a three dimensional issue.
Gold is quoted in dollars US.
DROOY SA costs are borne in the Rand.
IMO, the chief fundamental problem for DROOY is that even though gold has gone up in price here in the USA, in terms of the local SA mine, it actually has gone down in price, while it continues to pay its workers and costs with the increasingly expensive Rand. It's margins have collapsed to the extent that it actually loses money in operations, (a generalization given very complicated accounting analyses for gold reserves.)
The Rand has appreciated significantly against the dollar. I would imagine that a US$ - Rand chart may be quite similar to the charts you posted on DROOY, or inverse, depending on which variable is on your Y axis.
So, my question is this and I'm having a hard time expressing it. Where you have a currency affecting the movement of money in an equity, can one explain the movement of the equity with the same TA statistical rationale as one uses in more typical analysis?
TA, if I understand the theory, explains the statistical movements of buy-sell decisions over time, with sufficient number of decisions (volume, liquidity,etc.). What is the afect of adding another variable which would skew all decisions at once.
Many commentators feel that the SA government will try to weaken the rand. This would likely cause DROOY to spike as much as 50% in a day. It keeps falling though because nobody knows whether that 50% will come tomorrow or at a base of $1 or lower.
Sorry for the long post, but I was wondering how a TA expert would look at this problem. |
