April 9, 2007

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On April 9, 2007, James Turk spoke at the New York Region Meeting.

Turk presents his view on how the gold market looked at that time, and admittedly it would seem to be dated information. But, as in many of these archived video presentations, the speaker offers valuable insights into their thought process. The value of this presentation is not in knowing whether you should buy or sell gold in the spring of 2007, but the chance to see the way the opinion is formed is well worth the time.

A technician since his college days, Turk combines technical analysis with fundamental analysis in his work. He read William Jiler’s classic book, How Charts Can Help You in the Stock Market, and has seen the value of technical analysis ever since.

The first lesson he learned is to believe the market. The most important application of technical analysis in his opinion is to identify the trend. Most of his work is moving average based. Even his fundamental analysis employs charts. As an example, a chart of the M3 growth rate offers a backdrop to his analysis. Unfortunately, M3 is no longer reported by the Fed, but other money supply data is widely available and can offer similar insights. Like many analysts, Turk regrets the Fed’s decision to stop providing the M3 data and feels that valuable information was lost when that decision was made.

Like any other good, money has a supply and demand curve. The supply can be determined to at least some degree by using Fed data. Like with any other good, the demand is largely unknown with any degree of precision. The value of the dollar compared to other currencies offers insight into what the demand is. Declining demand is reflected in exchange rates. At that time, he noted a shift was visible in some cases where investors were looking to commodities as a store of value. His long term view was bearish on the U.S. dollar.

The concern about the value of the dollar and other paper currencies can be bullish for other assets. In particular, precious metals offer a perceived safe haven in this environment. Turk presents a variety of long-term charts and adds an interesting historical perspective to the analysis of several economic indicators and tradables. Looking at oil since the 1940s offers new insights into the trend in this market. The Dow priced in gold back to 1913 is also an interesting chart, showing a cyclical nature that offers timing opportunities.

Far from being dated, Turk’s long-term approach to analysis is as timely today as it was when he made his presentation. His ideas are actually still tradable, three years later, and worth studying by any technician but especially those wanting to understand the gold market.