Wednesday, August 14, 2013

Riding the Wave Up With All That Glitters

Gold and gold/precious metal equities have begun to stabilize (at least in the short-term, lets see if it holds) after the vicious sell off that took the yellow metal from a high around $1,900 to a price per ounce in the $1,200 to $1,300 range. As I stated in a previous post, I believe that gold and related equities will continue to appreciate in the short-term, a view based on the supply/demand setup apparent in the price and volume characteristics. How, when and if each achieves their respective price target should provide clues into the future appreciation (depreciation?) potential of these investments.... at least on a short-term basis.

Turning to the models, money supply continues to exhibit some characteristics that suggests additional factors are contributing to the changes in money stock, over and above seasonal influences. Additionally, the time factor and the general rise in the price of gold results in timing models that continue to track upward versus previous levels. The following charts show the latest model results

6-month model, -0.77

1-year model, -1.36

2- year model, -1.93

Although the models continue to lurk upward, they all remain below the 0 demarcation, levels commensurate with better-than-average performance of gold equities in the week's and months ahead. Additionally, the 2-year model calculation remains near the -2 strong-buy demarcation level at -1.93. To me, this suggests that the gold/precious metal equities remain solid holdings if not out right buys. More so, the risk model using the slope of the models remains positively weighted. A positive weighting in the risk model in conjunction with negative timing model calculations has historically indicated strong go-forward performance of precious emtal equities.

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