All That Glitters Is Just More of the Same

I really do not have to say much about the timing models in this week's update. Money supply came in as expected and continues to follow more normal seasonal patterns. This is while the price of gold flutters between $1,350 and $1,420 per ounce. Lastly, the Phily Gold/Silver Miner Index has largely stabilized (possibly) between $100 and $110 per share. The resulting change in the timing models marginal. The two longer dated models remain in a buy range under -2. The 6-month model calculation rests at -1.6. All are largely unchanged.

6-month model, -1.6


1-year model, -2.1


2-year model, -2.5


That said, both the gold market and the gold stocks have pulled back from the high end of the trading range in recent sessions (something I warned about in last week's column). Although declining, there does appear to be some potential positive technical setups in gold and the precious metal stocks. Turning to the fundamentals of the sector, the gold miners appear to be turning away from the philosophy of accelerating production growth and are becoming more focused on controlling production costs. I think this will make the sector more rational in the long-term and set up more upside for gold and precious stocks once the investor sentiment cycle turns. This will be especially true if gold prices increases and the miners become levered plays on the metals. It also potentially portends a consolidation within the industry.