Gold: Numbers To Watch On The Upside

|
Includes: BAR, DGL, DGLD, DGP, DGZ, DZZ, GEUR, GHE, GHS, GLD, GLDI, GLDW, GLL, GTU, GYEN, IAU, IAUF, OUNZ, PHYS, QGLDX, SGOL, UBG, UGL, UGLD
by: Jay Taylor

Are there numbers not far above that suggest an upturn? Yes.

This decline has aged six months since its peak monthly momentum readings in January. (Monthly momentum appears ahead.) That alone is a factor to note, as it's rare for a monthly oscillator to acquire seven months of upside or downside momentum readings.

Weekly momentum (on left in daily bar format) also reflects that age.

The first level to watch for sign of an upturn is the ability to cross the red arrow, taking out the highs of the past two weeks of action on momentum. For the rest of this week, that requires reaching $1275, but next week, getting up to the $1263 area will cross that first horizontal pivotal level (subject to some adjustment).

The major structural level that indicates weekly momentum upturn is a daily close next week over the downtrend that traces back to January. That means closing over the 3-week average (the falling downtrend will intersect at the zero line next week). And next week the 3-week average/zero line is projected to drop to $1271.60 (also subject to some adjustment depending on the rest of this week's action). That number adjusts down weekly.

Monthly momentum (the 3-month average oscillator) is shown here in daily bar format for structural clarity.

Much age (six months inclusive) and many pivotal highs now define the momentum trend structure overhead. For now, the estimated new 3-month average/zero line beginning next Monday will drop to the $1301 area (subject to final calculation at the close of this month).

The trend line intersects such that during the early part of next month a daily close at $1276 or higher will clear that trend line. By later in the month, the line will be broken above with a daily close at the $1270 area.

MSA is monitoring numbers both below and above and will update.

Why our intense focus on gold? Well, MSA, despite adhering to its own technical concepts, does have an overriding macro-fundamental view. And in the current markets (all asset classes), the multi-year QE, ZIRP and NIRP policies have unquestionably distorted many investment and asset allocation decisions, both by individuals, corporations and governments. If the cost of money (rates) and quantity of money is as distorted as it is and has been, then many major investments and commitments have been made based on protracted and massively false data assumptions. When QE halts or slows, as it is just beginning to do, that will undercut the house of cards built on the prior monetary manipulations since at least 2010. Much unwinding, or more likely rapid unravelling, will occur in the wake of this shift. Assets that were most elevated due to this central bank false pricing will come undone (equities primarily), and probably more than just a return to some mean.

There will be islands of stability in this turmoil. Gold will stand out - we have little doubt of that. Still, we monitor the technicals and seek to ensure that our subscribers are there at the appropriate time of optimal risk/reward entry. So far, that was our annual buy signal at $1140 in February 2016. If we see reason to momentarily step aside, we will advise.