Gold Update

On your left is plotted the average monthly price of gold, dating back to January 1995. That’s the red line; you can also see the 20-month average (purple line) and the 40-month average (yellow line).

As we near the end of October 2017, the averages were $1,281.09 for this month, $1,261.36 for the 20-month average, and $1,248.61 for the 40-month average.

Since I’m not trading gold for a profit, but only wish to hold the bullion I own as a place to store my long-term savings, I’m not concerned about moves like those we have had since the beginning of 2016.

I am concerned, however, with the kind of massive decline we had from 2013 through 2016, not so much because of the value of my gold metal holdings, but because of the massive carnage it does to the gold shares. This is extremely important because while gold share indexes tend to appreciate by 500% or so in a gold bull market, they give back 80% of their value in the kind of swift bear market we experienced from 2013 to early 2016. To use a football analogy, as a gold share investor I’m most concerned about playing prevent defense. I can handle the short declines, but I want to avoid being long gold shares when the next major bear market arrives. I only wish I’d had the advice of Michael Oliver back in 2013. I could have saved myself and my subscribers a heap of pain if I had known Michael then.

I’m not going to tell you he is infallible, but since I have been following him, for my longer-term perspective he is as close as any technical analyst I have found to date. And so here is the update that Michael passed along to his subscribers earlier today.

While gold’s 3-yr. avg. momentum oscillator (in our October 23rd report) continues to say the macro-trend is positive, the name of the game with gold during this period of multi-asset category transition (from late 2016 to now) has been for gold to generate repeated spooky selloffs, the largest being the one in the last three months of 2016. 

So here we pull out two less long-term oscillators, using big round number averages, the 50-wk. and 100-wk. averages. At current levels we can’t say for certain whether there will be more trading decline. Note the various lines of possible/probable support on all three charts. Those are only now being approached in this decline. 

On a short-term basis (daily momentum), if December gold (about to become front month when October expires tomorrow) closes Friday at $1276.90 or Monday above $1275, then expect a trading upturn, potentially one that leaves these lows behind. Note: Gold closed at $1271.80 on Friday.

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.