The models remain in an accumulation phase with both the 1-year and 2-year calculations remaining below -2. That said, I would watch for a potential pullback before committing any more funds.This thesis is based on a number of factors including the nearly 7% rise int he Phily Gold/Silver Index (Ticker XUA) over the last week, which is a rather large increase over such a short time period. In addition, the price of gold traded up towards levels near $1,400 per ounce, on lighter volume levels, while money supply came in weaker than expected. This has led upticks across all the models I watch, but also an increase to -1.6 in the 6-month calculation.
Looking at money supply first, money supply in the most recent reported week was $10.519 trillion, a weekly decline more than 20 basis points. The week-over-week declines in recent periods has remained directional similar to past historical seasonal fluctuations, but the degree has been coming up short.This last fact has helped put pressure on the timing models, and more directly on the potential upside for gold. The same pattern is seen in the rolling 2-month rolling change in money supply figures. The seasonal fluctuations in money supply are shown below.
1week
2 Month
One thing that stands out to men is that money supply has been under shooting when growth trails off and over shooting when growth accelerates. I have no reason to believe this trend will not continue and I have modeled this into the go-forward money supply figures.
As for the price of gold, the price of gold has tracked up in the latest week of trading. However, the volume (at least on the GLD or the Gold Trust ETF) has been weak. This can be seen in the chart below.
Looking at money supply first, money supply in the most recent reported week was $10.519 trillion, a weekly decline more than 20 basis points. The week-over-week declines in recent periods has remained directional similar to past historical seasonal fluctuations, but the degree has been coming up short.This last fact has helped put pressure on the timing models, and more directly on the potential upside for gold. The same pattern is seen in the rolling 2-month rolling change in money supply figures. The seasonal fluctuations in money supply are shown below.
1week
2 Month
One thing that stands out to men is that money supply has been under shooting when growth trails off and over shooting when growth accelerates. I have no reason to believe this trend will not continue and I have modeled this into the go-forward money supply figures.
As for the price of gold, the price of gold has tracked up in the latest week of trading. However, the volume (at least on the GLD or the Gold Trust ETF) has been weak. This can be seen in the chart below.
So this presage a decline in the price of gold or the gold stocks? Maybe. Although gold has had weak gains, the Market Vectors Gold Miners Trust (ticker GDX) is showing some tentative signs of accumulation on increasing volume.
It may be too early to call, but my research has shown that the price of gold stocks tend to lead the price of gold. It is also interesting that the gold stocks have been acting better than the price of the yellow metal. This could be an indication that the gold miner investors are betting on a turn.
Although investors an traders may be betting on a turn, I also think that another swing toward the $1,350 level in gold may lead to a shake out of weaker hands.
Turning towards the models....
6-month model
1-year model
2-year model
Both of the 1-year and 2-year calculations remain below the -2 level, suggesting that we remain in a phase where accumulation for long-term appreciation is warranted. However, the 6-month model has bumped up to -1.6. Still positive but less so than in recent weeks and reflecting the movement in money supply, gold and gold stocks. This makes me a little hesitant for continued short-term gains in gold and precious metal stocks.
No comments:
Post a Comment