Michael Oliver’s View on Gold & Gold Shares for 2019

I could spend countless pages telling you why I think gold will rise or fall in 2019, but applying the old adage that a picture is worth a thousand words, I would rather use the structural and momentum work of Michael Oliver to convince me of my favorite metal’s price direction in 2019. Of course, I need to mention once again that it isn’t the price of gold that varies. Rather it is the value of the dollar which over time continues to lose purchasing power. Gold does not! That said, we live in a dollar-centric world and until such a time as the dollar gives way to gold or other major currencies there will generally be an inverse relationship between the U.S. dollar and gold. And so here is how Michael sees the gold markets heading into 2019 as priced in dollars. Be sure to consider subscribing to Michael’s modestly priced Gold, Silver and Mining Report at www.OliverMSA.com.

                                                                                                                                    GOLD

Gold achieved a momentum breakout two weeks ago (red horizontal). The market paused/ dipped last week. We regard the breakout action as valid and highly likely to produce the further marginal upside through the green line and spark a rapid price move that takes out price chart highs of past five years (those highs ranging from $1390 to $1360). 

“For this coming week (beginning Dec. 17) a weekly close at $1280 or higher will be above the green line. The breakout number adjusts down a few dollars each week. 

“For those who are building or adding to long positions in gold or gold-related, we suggest regarding that $1280 level as a secondary or “add on” level. 

“In terms of downside protection, we do not want to see gold post a weekly close at $1220 or lower. Such a weekly close does not alter our very long-term (annual momentum) positive view of gold. It only muddies the recent breakout and the issue of upside speed.”

Regarding silver, Michael has always maintained that once the bull market in precious metals gets underway silver is likely to outperform gold very decisively. His monthly momentum chart shows that silver has clearly broken out above a momentum downtrend dating back to early 2017. For the week ending December 21, Michael suggests adding to your silver positions if silver breaks above $15.07.

GOLD SHARES

“As a proxy for the gold share market, Micahel tracks the VanEck Vectors Gold Miner ETF (NYSE-GDX) These are of course the more senior gold shares to those generally covered in our letter though of course Klondike Gold is one of the outstanding names that we pay close attention to that is in the GDX. But suffice it to say that as the gold price begins to rise, you can expect these stocks to move first. Then the rise will move down the food chain to the more junior companies that are followed in this letter. While the bigger companies will rise first in percentage terms the really large gainers will come from the more speculative successful exploration companies such as many of those covered in this letter.  

“Here is what Michael wrote about GDX in his December 16th missive: 

“The key momentum breakout level was overcome two weeks ago. Last week rested. 

“That breakout by momentum cleared a three-point downtrend going back to early 2017 (defined by peak weekly closing readings) as well as overcoming a prior momentum floor. Coincident breakouts. 

“Once momentum clears hurdles, it’s often worthwhile to turn one’s eyes to price hurdles (price breakouts are almost always lagged to momentum breakouts). 

“On the price chart, no doubt the bears think 21 is resistance (black horizontal). Nice line. 

“The price chartists can also plot a line through rally peaks going back to late 2016. That line, which might be called a final line of price resistance, comes through now at around 24. 

“If we see GDX close a week much above 21, then that’s what MSA terms an abort of the prior floor. Momentum has already accomplished that abort, and we strongly suspect price will be next. 

“Or one can wait on the sidelines (most investors, thankfully, aren’t even looking at this sector of assets!) for the 24 level to be cleared. But that’s an exercise in being last in the game. As for that price chart trend line (we rank it a “silly” line, due to its public obviousness), consider the fact that just above 23 on a weekly close—before even hitting that price chart line—this momentum chart will be closing above the peak of that September 2017 oscillator high (the highest circled reading along the red downtrend). So while some might wait for 24 to be broken above for a wake-up call, momentum will be free and clear of all hurdles just above 23. 

“Summary: We suggest that focus now should be on the old price chart floor at 21. Close a week over that level and it might begin to wake up some price chart investors. If one has initiated positions based on the momentum breakout of two weeks ago, a large and valid reason in our view, then over 21 might be a good add-on level. Get credibly over 23 (that number adjusts a bit each week and we will update) and this long-term momentum chart will blast out the uppermost readings since the late 2016 drop. Open field running at that point.”