Gold’s Looking More Constructive Again

The average monthly gold price based on the London PM Fix is charted on your left. The average for the month of January 2017 was $1,192.65. That compared with a 20-month average of $1,230.33 and a 40-month average of $1,251.24.

The average for the first two days of February was $1,212.80. The 40-month average as of Friday was $1,253.83 and the 20-month average was $1,233.64. Obviously these averages are converging with the monthly averages, getting very close to the 20-month average and not all that far from the 40-month average. 

Oliver’s Monthly Gold Chart

Now take a look at Michael Oliver’s monthly charts for gold. As so often happens and one of the aspects that has made his work so valuable is that his momentum charts not only often give you a signal before the price charts, but once momentum is broken through key levels it provides some comfort that you are safe at least for a while in expecting that same direction to be in play. The chart on your left was published to Michael’s paid subscribers earlier today. Here was what he wrote to accompany these charts.

“Having worked its way in layers through various resistance structures, monthly momentum has now emerged above the zero line/3-mo. avg. In the January 29th weekend report (page 6), we also noted that a monthly close back over the 3-yr. avg. ($1190.17) would be a reassuring sign. We got it. We also said that a daily close in February over $1189 would be a further positive.

“That was actually an estimate of where the 3-mo. avg. would be for February, but as it turned out that average rose a bit to $1190.90, and that was overcome on day one of the new month. Best support now is probably around $1190, not that this emergent momentum situation needs to pull back. Indeed, if we look at the momentum chart, it seems deserving of more upside post breakout reward (perhaps to the upper $1250s), before having to engage in a trading pullback.

“Repeating a number from prior reports: if anytime this year gold can touch $1309.18, to put a fine point on it, that puts gold’s 3-yr. avg. momentum (not shown here) back at last year’s top percentage tick which was 10% over the mean. (Gold’s top price in 2016 was $1377, but that’s not the issue). And our experience argues that a return to the top momentum tick in a newly emerged annual momentum trend will likely not pause long at that level, but continue the bull trend.”

Michael is talking about a three-year (36 month) average of $1,309.18, which if touched would likely flash a green light for considerably more upside for gold. With the current 40-month monthly average London Gold Price fix standing at $1,253.83, a rise above that average as well as $1,309.18 should provide more bullish assurance.