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. ♦




How precious is gold?

How precious is gold?Gold is suffering under the weight of the strongest US dollar we’ve seen in years. Bullion may not be in demand at the moment, but it’s still precious judging from this fascinating graphic by Visual Capitalist of all the gold extracted last year. The 5.36 meter cube represents all the gold produced in the world in 2013. It amounts to 2,982 tons worth $125 billion. Check out visual representations of a year’s worth of seven other major commodity extractions (silver, oil, platinum, uranium, nickel, copper, iron) here.

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. ♦