Gold Update

gold

What a year it has been for our gold shares. January started out looking like the gold correction in this secular bull market in gold would never end. The monthly averages for the London PM gold fix prices dating back to 1995 are posted in the Gold – London PM Fix chart to your left. The average price of gold for the month of January was $1,097.39.  It rose to $1,340.59 in August but then a gut-wrenching correction took us down to $1,150.32 in December. What is remarkable is that on the basis of a $52.93, or 4.82%, rise in the price of gold, most categories in our Model Portfolio were able to realize triple digit gains.

dailySo where does that leave us for 2017? I think it leaves us in excellent shape for what could be a spectacular year for gold shares. At the start of 2016 it felt like we were heading for $600 gold. It was a sense of hopelessness for gold bulls. But with a legitimate view that gold was not headed toward a state of worthlessness and now with a growing sense that the bottom is in, I enter the New Year optimistic for gold shares.

On your left is another chart—namely, GDX, which Michael Oliver sent out on December 29—showing price and momentum for the major gold mining share index. As with all of Michael’s work, you need to pay special attention to his momentum charts in connection with price. Here is what Michael wrote on 1/29/16. 

Intermediate term momentum (50-day avg. oscillator) is emerging upside. Just hang around today (currently at 20.73) and momentum is above prior recent rally high. More importantly, the action has already emerged out above a downtrend that traces back to July. That trend line is plotted through four sets of rally high closing readings. 

Next resistance and pending major breakout level is the zero line/50-day avg.  

If current breakouts (downtrend and recent horizontal) are sufficient to drive readings to that falling average/zero line, then likely some pause or fight there, but we’d bet ultimately that level finally gets taken out. The zero line has been vicinity of repeated overused resistance since late August, and given size of this potential momentum base, if can later close a day over that 50-day avg. expect major upside surge. Will update if zero line is cleared. 

We present only a small smidgen of Michael’s excellent work in this letter. He has been kind enough to grant me permission to do so and he has also been kind to appear on my radio show almost every week. As such I will keep you up to date on a weekly basis with regard to Michael’s work. But if you can afford to subscribe to Michael I recommend you do so because I have yet to find a technical analyst who is more helpful to me personally than Michael Oliver. Go to www.OliverMSA.Com to learn more about his service and to subscribe.

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.