Michael Oliver’s Latest Comments on Gold

Perhaps the longest-term momentum oscillator we’ve recently used is the 200- wk. average, roughly the same as a 4-yr. avg.

We noted some time ago that there was a flat layer of momentum resistance on the 200-wk. oscillator from mid-2016 until a month ago. Intraweek highs during that shelving process reached +5%. The chart here, however, shows weekly closes during that period, and the top three over that year-wide span were 4%, 4.09%, and 4.26%.

It isn’t always the case that dropping back below such a prior breakout structure means the end of the world, but we’d prefer to see that shelf hold, especially on a weekly closing basis. To close below the +4% level this week, the October contract (the front month active contract) would have to settle the week at $1278.

But meanwhile, in the broader scheme of things, momentum is stronger than price and has been since late 2015. We’d be very concerned if, for example, price had just taken out last year’s price high but momentum had fallen short. A non-confirmation. Instead, it was the other way around. Momentum has led the way by pre-confirming all the upside in price since late 2015.

Gold annual momentum (price vs. 3-yr. avg.) A very similar situation in most respects to the 200-wk. momentum chart. However, the highs of the past year on this oscillator aren’t perfectly horizontal (two different red horizontal lines note the prior peaks since mid-2016). Still, the recent surge did manage to exceed the 2016 peak oscillator reading, though price only approached that high (the recent high was $1358 vs. the 2016 high of $1377).

Again, it’s clear to us that whether you use a weekly or monthly price chart, you can plot a line across highs or weekly or monthly closing highs and arrive at some gradual lines of overhead resistance. The comparable momentum barriers going back to late 2013 have been widely overcome. Price has now drawn its final line(s) in the sand so that everyone can see it (black lines on monthly price chart).

We believe it will be overcome and that when that occurs (possibly in Q4), investors will become much more aware of the current gold trend. And as we’ve suggested in recent reports, there’s a good chance that will occur as investors grow warier of stocks (if, for example, the S&P500 gets shin-kicked by 5 to 8% in Q4, as we tend to think will happen). And if both events occur (and we’re not talking a great percentage move in either case), then that should further tip the balance in an ongoing investor asset class preference shift (more toward gold) , which so often occurs in trend changes.

Editor’s Note: Near term futures for gold closed the month at 1283.47.Consider subscribing to Momentum Structural Analysis at www.OliverMSA.com You can request a free sample of Michael’s work as well.

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.