All That Glitters- Don't Bite on Gold Stocks Yet

With the announcement that the Fed will be buying an additional $40 billion in treasury notes and the recent weakness in gold, some may be prompted to buy gold and other precious metal stocks. I wouldn't buy just yet. Inputting the most recent price of gold into the timing models yield only weak buy signals. In addition, rolling up the money supply by $20 billion a week still only gets us to weaker buy signals- at least in the near term, as there is a time component built into the models. The most recent model results show the six month model at a -0.21, noting that the recent price decline in gold suggests a  -0.31 reading. These results are consistent with somewhat positive future results versus the long-term average. I would want a better risk/reward outlook to buy into the gold stock complex.

The most recent 6-month model


I would note however that the Market Vectors Gold Miner Index has not shown any sign of strength. We did see some increase in demand in yesterday's trading, but also would point out that the price pulled into the the November 14 downdraft on less comparable volume. This suggests, to me, that gold stocks are not ready to rise just yet.