I was all set to report on another benign update on gold/precious metal stock timing models through the end of last week, but the market would have none of that. The decline in the price of gold today has provided long-term investors, in my opinion, another shot at great entry point into gold-related mining stocks at attractive prices.
Before I get into the models, I think it would be appropriate to update you on the my forecasts for money supply. As you may you know, the timing models I employ use money supply as significant input. However, any casual observer of the money supply figures released by the Federal Reserve knows they are reported with a two week lag. That stated, I use a combination of Federal Reserve balance sheet data, trend analysis, and seasonal factors to estimate money supply through the present two weeks. What I have not stated is that I will also forecast money supply figures further out, usually on monthly basis and other discrete points in time to create various scenarios. This is one of those times.
The timing models up through the end of last week remained in a mid-zone, but showing a continuing weakening trend on a combination of rolling time and a price of gold that had hovered around $1,600. In fact, the 1-year model stood at -1.6 and the 6-month model was a -1.2, off from a respective -2.35 and -1.9 just over a month ago.
This all changed today. The decline in the price of gold towards the mid $1,500 range has pushed the attractiveness of gold stocks back up into a stronger buy territory. My assumption is that money stock will decline slightly from the March 18 figures but rebound strongly in the first week of April. Using my estimates for money supply and the recent price of gold yields the following timing model results.
3-Month Model, -1.6
1-Year Model, -2.2
6-Month Model, -1.8
The combination of a 1-year model and 6-month model at similar extremes has provided significant upside and risk control attributes in the historical context. Seeing this and other setups, I deployed further capital into the gold/precious metals stocks in today's trading.
Before I get into the models, I think it would be appropriate to update you on the my forecasts for money supply. As you may you know, the timing models I employ use money supply as significant input. However, any casual observer of the money supply figures released by the Federal Reserve knows they are reported with a two week lag. That stated, I use a combination of Federal Reserve balance sheet data, trend analysis, and seasonal factors to estimate money supply through the present two weeks. What I have not stated is that I will also forecast money supply figures further out, usually on monthly basis and other discrete points in time to create various scenarios. This is one of those times.
The timing models up through the end of last week remained in a mid-zone, but showing a continuing weakening trend on a combination of rolling time and a price of gold that had hovered around $1,600. In fact, the 1-year model stood at -1.6 and the 6-month model was a -1.2, off from a respective -2.35 and -1.9 just over a month ago.
This all changed today. The decline in the price of gold towards the mid $1,500 range has pushed the attractiveness of gold stocks back up into a stronger buy territory. My assumption is that money stock will decline slightly from the March 18 figures but rebound strongly in the first week of April. Using my estimates for money supply and the recent price of gold yields the following timing model results.
3-Month Model, -1.6
1-Year Model, -2.2
6-Month Model, -1.8
The combination of a 1-year model and 6-month model at similar extremes has provided significant upside and risk control attributes in the historical context. Seeing this and other setups, I deployed further capital into the gold/precious metals stocks in today's trading.
No comments:
Post a Comment