Gold has a pulse

Gold / US DollarGold hit a six-week high yesterday, benefiting from US dollar weakness. The inverse correlation between the yellow metal and greenback goes back several years – check out the nearly mirror images on this year-to-date chart. (Bullion is represented by SPDR Gold Shares (GLD) while PowerShares US Dollar Index Bullish (UUP) serves as my proxy for the US dollar.)

Gold is not for everyone. It’s a commodity with wide, erratic price fluctuations. However, for those who can tolerate volatility, an allocation to gold can help serve as a hedge against inflation, financial crisis and social unrest.

My newsletter’s gold timing model flashed a buy signal yesterday, its first venture back into the metal since July 24. It’s not clear whether GLD’s intermediate-term uptrend will have legs, but the risk-reward level is more favorable now than it’s been in several months.

This month marks the 30th anniversary of The Mutual Fund Strategist newsletter’s gold timing model. You can see in this archival copy of page 2 of our October 1984 issue that gold started out on a sell signal. Those were the days…. snail mail newsletters, telephone hotlines, and money market funds yielded over 11%!October 15 1984 Issue

♦ Please note that my readings will change without notice,  so please don’t buy or sell solely based on anything you read in this blog. ♦




Gold due for a bounce

Gold had a promising start to 2014, but the yellow metal’s rally ran out of steam mid-March. Gold caught a bid again in June when President Obama announced a plan to send 300 military advisers to Iraq. However, that move also fizzled and the precious metal has moved steadily lower since then.

So far in September, SPDR Gold Shares (GLD), the exchange-traded fund I buy/sell for clients, is down 2.4% — surprising considering that this month is historically the best for bullion.

What’s weighing gold down? Blame the strength of the US Dollar. The Greenback and yellow metal have a strong track record of inverse correlation.

Currently gold is oversold and due for some sort of bounce. If that move is going to have legs, though, we need a “Golden Cross” where the metal’s 50-day averages crosses above (and stays above) its 200-day average. For now my intermediate-trend timing model for gold funds remains on its July 24 sell signal.

♦ Please note that my readings will change without notice,  so please don’t buy or sell solely based on anything you read in this blog. ♦

Bullion surges to 6-month high

The value of gold plunged 28.3% in 2013, bringing to a screeching halt the yellow metal’s 12-year win streak. With increasing numbers in 2013,  analysts put their bear claws into gold and declared the bull market over.  Just this past January Reuters news service, in an article titled “Gold bull market ‘firmly in rear view mirror’,” reported about its survey of 37 analysts whose consensus forecast is for gold to finish 2014 at $1,235/oz.

Well, gold bullion is off to its best start to a year since 1983, closing today at $1,367.30/oz. SPDR Gold Shares (GLD), my proxy for the gold market, is up 13.4% so far in 2014. While gold has certainly been a beneficiary from uncertainty surrounding the Ukraine-Russia conflict, the metal has actually been climbing since late last year. In February GLD recorded its first monthly inflow since December 2012.

As you can see on my chart, gold found its footing in December, surpassed its intermediate-trend 50 day average in January, and then topped its longer-term 200 day average in February. If current strength continues, a “golden cross” will take place where the 50 day average moves above the 200 day average – a technical pattern which often ushers in a period of higher prices.

Regardless of how gold performs in the near, intermediate or long term, I’m a proponent of maintaining a small investment allocation to bullion as a hedge during economic uncertainty. We only need look back to the 2007-2009 bear market in US stocks when the S&P 500 fell 56.8% from peak to trough while GLD, on the other hand, surged 23.9%.

♦ Please note that my readings will change without notice,  so please don’t buy or sell solely based on anything you read in this blog. 

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