A Summer Vacation for Gold Bugs

GoldChartGold bulls would do best to go fishing/go to the beach, whatever they do in summer–for the next two weeks–and hope gold is still lingering in upper $1200s after today’s new highs as of early next quarter.   There’s a reason.(Michael Oliver – Momentum Structural Analysis – June 16, 2016 – www.OliverMSA.com)

That is a quote Michael sent to his subscribers yesterday after gold broke decisively through $1,300. As with most markets he covers, Michael’s proprietary work on the gold markets has proven to be most helpful to me in sensing where the gold market is heading. Somehow, his momentum indicators have been much more reliable than the work of most analysts, who look only at price charts. That applies not only to gold but to other markets he covers as well. But of course gold is the main focus of this letter so it is Michael’s work in that market that I mention to you most often. He has also done some key work on the T-Bond markets that I am also paying very close attention to because when that bubble bursts it will be all over for the existing order. That should be the time when a phenomenal transfer of wealth takes place from those who buy government and Wall Street propaganda about paper assets to those who own gold. Again, I’m not hoping or praying for that fateful time because it is likely to result in hellish conditions for humankind. But I am of firm conviction that policymakers, having violated Nature’s laws as they apply to economics are setting the stage for a return to an economic dark age.

Getting back to Michael’s work on gold, here are his major points:

  • The gold markets have set the stage for the next power leg up by piercing through a monthly momentum correction of the past four months.
  • When it fell through the bottom of the price range to just a whisker below $1,200 to the high 1,190s, technicians turned bearish, looking for a return back down toward the old lows of around $1,000.
  • However, when it fell to the high 1,190s, it held above “support” levels on Oliver’s quarterly momentum chart (perforated line on momentum chart above).
  • Using a quarterly point and figure chart for gold market momentum, Michael speculates that gold is likely to “fumble around” between $1,280 and $1,320 through the end of this month (another nine trading days) and thereby setting the stage for a major breakout in Q3. He anticipates a decline in early July to perhaps $1,284, then an uptick to around $1,355, which hits a triple top in his momentum charts. At that point, he would expect not just a tiny move but a major move up toward his first major peak for gold in the $1,460 to $1,540 range.
  • Michael derives that $1,460 to $1,540 range based on a 30% rise above the zero line in his momentum charts, which he notes has been “almost a norm for gold.” Over the past decade Michael notes that at least four up-legs in the gold market have reached the +30% momentum readings before falling within decimals of a minus 30% reading on his momentum charts in 2013.

Of course we cannot be certain that past patterns will always work to predict future market patterns, but Michael’s track record has provided me with as much confidence in terms of longer-term planning than any other technician I have mentioned in these pages over the years. That is not to take anything away from others I have discussed. It’s just that Michael’s work has been the best I have come across thus far.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.