AngloGold Ashanti is a gold mining company. Its stock is trading at $31.77, quite close to the key support level of $30 that is confirmed several times at the AU stock monthly graph. The last time I dealt with a gold mining stock I was discussing about Orofino Gold and its laboratory results’ impact on the charts. That didn’t turn out as I expected, as ORFG penny stock didn’t manage to enter a long term uptrend and even declined to lower lows. AngloGold isn’t likely to develop a strong uptrend either, rather than continue trading inside the $30-50 range. That is why I’m picking AngloGold stock for trading long.
Yet I’m not alone when picking AngloGold Ashanti stock. A couple of financial authors have lately predicted an advance of AU shares price. Alex Fredricks points out that AngloGold’s stock chart indicates oversold conditions, given the Relative Strength Indicator being below 30. SingStock.com also noted the price gain of AngloGold stock on Friday, despite the US dollar strength and weakness in cyclical commodities. The SeeekingAlpha contributor, Bret Jensen, has discussed 6 reasons to pick up AU stock at under $32 a share, namely stock’s bottoming and low price by historical standards. According to Bret, analysts’ median price target for AngloGold Ashanti shares is $48 a share. AngloGold stock is one of the top gold companies for investment purposes as well, according to Allan Stanforth.
On the other hand, AngloGold may not be one of the 12 gold mining companies that are expected to be benefited by the reduced gold production and consequently the “peak gold”. Gold mining companies that are most exposed to South Africa are predicted to lose share value unless they develop resources outside South Africa. Gold production in South Africa has fallen from 1,000 tons in 1970 to 250 in 2011 as Investment Underground states and in conjunction with inflation in India and doubts about Euro and the US economy, that may lead to gold price climbing. However, a commenter disagrees with the author about the flawed logic behind his article. Chris Frangold at SeekingAlpha has referred to the Australian tough political climate, which can have a negative impact on AU stock price when the consequences kick in. Additionally Louis Navellier talks about the AngloGold rating that slipped from C (hold) to D (sell).
Trading AU stock: Long
The support level at $31 is an excellent entry point if we want to be trading long due to the bullish candlestick formation and the level’s confirmations in bigger time frame charts than the daily one. MACD divergence is also found both at daily and weekly graphs. Buying AngloGold shares for $32 a piece with a stop loss at $30 and setting the first profit target at $38 equals with a 3-1 reward to risk ratio. Suppose the AngloGold stock price goes back up to the upper limit of the trading range ($50), the R-R ratio can further be improved. Stop loss can also be set at $29 for safer trading, but that would hurt our odds.
Update July 24: I’m now long AU.