If you were going to commit funds to gold stocks, I would wait. The short-term run is probably done, and I would wait for a pullback before committing any more trading capital.
This call is based on my precious metal stock pricing model, which looks at the Phily Gold/Silver Index in conjunction with the deviation ion the relative price of gold to money supply. The current week's indicator just went positive, noting that the indicator is inversely related to future precious stock performance. (As an aside, I estimated the current money supply figures due to money supply being reported with a lag. These estimates are based on a combination of seasonal factors, changes in money supply, and the size of the Federal Reserve's balance sheet. In my estimation, the indicator went positive due largely to the significant rise in the per ounce gold price. Provided current gold prices, money supply would have to rise by more than 1.4% over a two week period for the indicator to remain negative.. Although not impossible, this has only occurred 36 times in over 1,600 observations, or 2.2%. This would be a 3 standard deviation event.)
This observation is also occurring while the GDX has tested the 200-day moving average, noting the ETF is pulling back from the apparent resistance level while overbought on the stochastics. I would not be surprised to see a pullback in gold and silver miner shares. Would I reduce positions? I don't know? For myself, I am leaning towards sticking with my exposure and allocated more capital on pullbacks.
No comments:
Post a Comment