Michael Oliver’s Latest Views on Gold

The following commentary was provided to Michael Oliver’s subscribers on March 6. Not only does Michael’s momentum work continue to suggest a bottoming process for gold and much higher prices to come, but this missive provides a bit of instruction as to how Michael looks at markets compared to the way most conventional technical analysts do. Go to www.OliverMSA.com to learn more about Michael’s work and to sign up to his excellent proprietary service that covers a most of the really important markets.

One of the most basic concepts of orthodox technical analysis is that when a low or high is established and later action drops below that low or moves above the high, you have a sell or buy signal. MSA ranks such price chart signals as coin tosses at best.

We see this exercise in “science” all the time on financial TV shows when someone chalks a line across price action and declares a double-bottom (W) breakout. We saw a couple such calls on the Dollar Index last week, when its action broke above the daily chart highs of early February. Many declared a W-bottom. Now the Dollar Index is a full point below its presumed upside breakout level and halfway back to its bear lows. Oh, well.


MSA tries to stay focused on the larger stuff: annual, quarterly, and monthly momentum. But sometimes we drop down to the micro-scale to deal with often deceptive market actions.

In this case, gold (lately the inverse of the Dollar—though not always) made a prominent low a month ago, and the price chart action four days ago took that low out. A sell signal by orthodox standards.

Meanwhile, weekly momentum, plotted in daily bar format on page one, (and also 3-day avg. momentum, not shown here) refused to take out that comparable low. In other words, a non-confirmation by momentum of the supposed price chart sell signal.

We wonder how many traders went short on that very clear “orthodox” price chart sell signal? Well, who knows, maybe it’ll work out for them. But right now gold is $30 above that “sell signal” and pressing towards $1340. Furthermore, today’s action tagged what’s now a four-point momentum downtrend on the weekly oscillator. Those who sold the downside breakout better sell some more here and now to halt this rally. But usually a four-point trend line on weekly momentum is indicative of downside momentum age (meaning it’s “old” for a weekly oscillator trend), and more than likely it’s working for an upside breakout—not otherwise evident on the price chart.

Also, a positive hint is that this rally was preceded by a momentum non-confirmation, which often suggests pending breakout the other way (in this case upside).

Our Short Term report this weekend specified that a weekly close at $1346 would turn the tide. On this daily segmented version of weekly momentum, something less—such as a daily close at $1342.60—would suffice as an upside breakout.

Gold closed the week at $1,324.  Below is your editor’s chart showing monthly average gold prices along with 20-month and 40-month moving averages.

So far, the average price of gold for the month of March is $1,321.84, which tops the 20-month average of $1,269.58 and the 40-month average of $1,255.51. Unless my eyes are deceiving me, this looks like a very good long-term trend with the monthly averages pulling up the 20-month, which is pulling up the 40-month average. Along with Michael’s solid momentum and structural analysis, I don’t know what there is not to like about gold.

I do believe the gold shares have some catching up to do with the gold price. Indeed, that was the message of Sean Roosen, CEO of Osisko Gold. Following are some comments attributed to him in the Canadian Globe and Mail paper, according to Stockwatch.

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.