Monday, December 2, 2013

All That Glitters (Gold) Getting More Attractive, Just Don't Step In Front of The Train

As you could probably guess if you have read this column in the past, a continued increase in the money supply in conjunction with a falling price in gold and gold equities results in a more attractive outlook for gold equities on a gold forward basis. In fact, the models have reversed course from previous publicly addressed measures and moved back deeper into a strong buy zone. Most notably the 6-month model calculation coming in at the -2 demarcation in the most recent week. The results reflecting the most recent data are shown below.

6-month model, current -2 versus -1.9 last week and -0.9 last month.

1-year model, -1.5 versus -1.4 and -1.1

2-year model, -2 versus -1.8 and -0.7

These are all decent figures indicating stronger-than-average performance for the gold equities in the months ahead. Just don't step in front of the that train. The risk model continues to move deeper in to negative territory (Note, unlike the timing models above, negative results in the risk model serves as warning that large negative shocks are possible).

The latest timing model results are shown below.

Since the risk model turned negative in the beginning of November, the Phily Gold/Silver Miner Index has lost more than 8% in value. This was despite model results that were clearly in the 'buy' zone at that time. I would avoid any new purchases for anything except long-term capital and would wait for either a turn in the risk model, a risk model above 0, or a sign of strength in the equities/yellow metal.

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