All that glitters- getting constructive but not there yet

Gold and precious shares appear locked in a holding pattern following the breakout that resulted from the announcement of QE3. As for the timing models, they appear to getting more constructive after topping out a 2.3 on the 6-month model and 0.66 on the 1-year model on September 17. That said, timing models remain in a range that suggests the precious metal shares will underperform the averages. Provided that the money supply is around $10.2 trillion, the 6-month timing model is 1.9.


As for the 1-year model, it currently stands at 0.51.


Just as a reminder, positive results on the timing model suggest that the shares of precious metal stocks will underperform the average results over various time frames. The more positive the model results, worse the results. The sames, but opposite, is true for instance when the model is in a negative range.

Starting with this post, I will also be looking at the 3-month model calculation. Much like the 6-month and 1-year models, this model shows the same discrimination and positive performance results. The performance results for the 3-month model calculation are shown below.

3-month model performance figures

	1w	3M	6M	1y	2y
Avg	1.60%	5.88%	13.60%	27.10%	48.82%
Median	2.06%	6.25%	11.74%	23.25%	43.85%
Max	25.37%	89.59%	88.09%	151.78%	203.74%
Min	-30.86%	-45.27%	-62.18%	-28.87%	-27.10%
St Dev	6.9%	18.7%	26.2%	32.1%	38.4%
Sharpe	0.23	0.31	0.52	0.84	1.27
#>0	71	73	75	80	87
%>0	61.7%	64.6%	70.8%	79.2%	91.6%
Count	115	113	106	101	95

Buy-and-hold performance

	1w	3M	6M	1y	2y
Avg	0.28%	3.07%	6.41%	13.98%	30.62%
Median	0.27%	2.14%	4.74%	13.33%	29.82%
Max	25.37%	89.59%	88.09%	151.78%	203.74%
Min	-30.86%	-62.22%	-62.18%	-64.56%	-50.89%
St Dev	5.4%	15.1%	21.6%	27.5%	32.5%
Sharpe	0.05	0.20	0.30	0.51	0.94
#>0	351	366	389	421	447
%>0	53.3%	56.4%	61.2%	69.0%	80.1%
Count	661	649	636	610	558

The 3-month model is also positive, standing at 1.4 through the end of September.


This model also indicates underperformance of precious metal shares in future periods. I will remain on the sidelines and await a better entry point.