Saturday, December 8, 2012

All that Glitters- The Slow Grind in Precious MetalsIt seems like it has been

Maybe because I am watching the price moves more closely with the development of the timing model, but it seems it has been such a slow grind over the last few weeks. I would love to say with strong conviction that we should sell or buy gold and precious metal stocks, but I can't. The timing models continue to suggest that gold and precious metal stocks are more of a hold that anything else.

Why is this. First off, the latest money supply figures (reported with a two week lag) ticked down versus the previous reported week, as the Federal Reserve's balance sheet contracted over the same time period. This is in contrast to the Federal Reserve's current balance sheet figures, which resumed its rise in the latest two weeks. In my opinion, I think this suggests that a slight upswing in money supply from the recently reported figures and that it will remain within a range of $10.3 trillion.

As for gold, the price of gold has been more-or-less range bound since early November, trading between the high $1,600's  and around $1,750. This range-bound action has helped lead the timing model to jump between weak-buys and weak-sell indicators. The latest weeks are no exception.

Using estimated money supply of about $1.3 trillion, the latest three month model  currently stands at a -1.3. This is most positive of the three timing I look at.

As for the one year model, the latest timing model indicator currently is estimated to be a -0.35. A positive indicator, but only mildly so.

The least positive indicator is the six month model (which I use as the primary indicator noting the 1-year model is sometimes slow to give signals while the 3-month model is more volatile) and it currently stands at a -0.21.

- a note to any new readers, the timing model indicators calculations are designed so that negative results are more indicative of positive future outperformance of gold and precious metal shares while positive indicators are more negative. The more negative (positive) the better (worse) the future performance.

With the six model remaining essentially neutral, I remain on the sidelines and will await a better entry point for gold and precious metal shares.