ELAM: Gold and oil advance

Gold futures rose 3.6% to $1,392.90 an ounce, the biggest one day advance since June 2016 and its highest settle since 2013. WSJ Today
An ongoing theme of this column is that unremembered changes in social mood result in social action. This is in contrast to the news media’s conventional explanation. This morning the media cites a weak dollar as justification. But the dollar has been falling from its peak in mid May. The correct explanation is that enthusiasm for gold has been growing since its bottom last August. Weaker currencies around the world, Russia, Mexico, has been Venezuela, add to the mix.
The long-term picture is that gold peaked near $1,900 in 2011. It has been in a seven-year correction since then, bottoming in 2015. Since then a series of higher lows finally resulted in a break-out Thursday. Friday’s price is now above the four moving averages (50.87,125,200) I track. And the conclusion is that gold and other metals are beginning a multi-year bull market advance.
As noted in this space last week, one would think torpedoing ships and shooting down a US drone would have catapulted the price of oil to a new high. Instead it did rise 5.74% Thursday just over its 125 day moving average. Momentum measures have turned up and the moving averages are coming together. This usually precedes a change in direction. Look for further advances in the price of oil.
The move up in oil prices has not translated to a move up in energy share prices. The XLE ETF remains below its 200 day moving average. Worse, the energy service XES is below all four moving averages. And it is down .32% Friday at $9.36. FRAK, the Shale ETF is not doing much either. Investors are not voting for improved profits in shale producers.
The Dow industrials hit a new all time high Thursday now at 26.86. The ten-year Treasury yield has dropped under 2% and indeed that is sending money to stock in search of better yields. The move in stocks would be more encouraging if Transports and the small cap Russell 2000 had hit new highs. But those two are flirting with their respective 200-day moving averages.
So there you have it. The move up in Industrials is unconfirmed by the Transports. Gold, the haven of worry, has taken off. And the oilfield, while busy, is not high on investors’ buy list.