Sunday, December 8, 2013
gold mining stocks and gold itself tend to rise and fall together. everyone knows this. in fact there have only been two periods in the last 20 years when the 21-week correlation coefficient of gold stocks and gold went negative.
but my how important did these periods prove to be! the early-2001 drop signaled the massive bull market in precious metals, while the negative correlation in mid-2011 coincided with the great reversal we continue to endure.
even though I anticipate a very tradeable rally in metals any time, the complete lack of a waning (let alone negative) correlation right now gives me another reason to remain skeptical that we are on the verge of a primary turn of trend in the precious metals complex.
since I hardly ever look at linear charts, I almost didn't notice this. gold's primary trendline here approaches $1200/oz which coincides well with my prospective low of $1145. (my target is based on intraday extremes while the chart above uses the five-day moving average of closing prices -- hence the apparent discrepancy.)
I assume many other observers have been highlighting the same trendline recently, but I have no idea who even blogs or whatever about metals anymore.
the line itself is fairly interesting in that it has gold's baseline appreciation rising at about $100 per year.
Thursday, December 5, 2013
we (okay, I) continue to monitor the chart highlighted in the previous post. the Precious Metals Complex has indeed dropped below 36, as anticipated.
yet spot gold remains at least $75 above the $1145 target while silver declines to show any relative strength. so even if they haven't yet been invalidated, the parameters aren't quite aligning as neatly as hoped. but how creepy would it have been if they did? markets sometimes develop according to one's precise whim, but such ego stimulations prove brief. at a major turn I'd prefer the pocketbook to inflate.
so from here we are moving from a cash position into gold stocks (buying FSAGX). space it out into five or 10 purchases until fully invested. try to buy on down days.
if this develops too far beyond last month's parameters we'll look for an exit, but for now I think we are on the right track.
Sunday, November 3, 2013
so the chart here is simply the geometric mean of the daily prices for GLD, SLV and GDX. It's a simple way to get a single picture of the precious metals 'complex'.
for much of this year I've been anticipating a major (though perhaps interim) low in gold close to $1145. it dipped below $1200 a moment this summer and I think a minor violation of the previous low will set up a major rebound to the $1500 to $1700 range. the way it looks right now, we'd have to expect mining stocks to follow suit ($HUI below 200 briefly). if silver can hold its prior low (which looks promising at the moment) that'd be a great divergence within the complex, leading me to be very positive on the metals and their stocks into the first half of next year.
the previous low on the chart up top was 36.07 (chart based on closing prices only). I'd look for it drop below 36 in the near term (closed at 40.09 Friday). if that happens, gains of 40 to 90% (depending on the vehicle) look attainable over the next several months. the geometric basket itself could approach 60. mining stocks should do the best, particularly in the early phase of the rally.
contact me if you have any questions.
Wednesday, June 26, 2013
somewhere back in mid-2009 I forecast the Dow-Gold Ratio would top out at 12. finally got there today. whoopeee!
there's nothing to brag about in this, the timeline of my 2009 target was in terms of months, not years, and in the interim the ratio went in the completely opposite direction. four years on, the progression of neither market looks anything like I envisioned in 2009.
but here we are with a 12. I'm merely a casual observer to the markets these days, and whatever I've bothered to post here the last few years hasn't been particularly prescient, but I still like this level (give or take) on the ratio.