I show the price chart of the Spider Gold Trust (ticker GLD) below.
You should notice the significant increase in the price of the GLD in Friday's trading (which is mirrored in the price of physical gold), which occurred on very light volume. What also should be apparent is that the rally since November 6 has been on contracting volume. This is in conjunction with a weak accumulation/distribution line, MACD and money flow figures that remain negative despite the rally, and a stochastic that is showing overbought conditions. To me this sets up a situation for lower prices in the GLD and gold, possibly setting up a price target of $158 on the GLD.
In addition, I think the track of gold stock prices suggest lower prices in gold. In one sense, this may seem counter intuitive, but the data bears it out. It also makes sense in that gold stock investors are continually looking ahead and discounting the future. The following charts shows the rolling 1-year slope of the annual daily returns for gold and the Philadelphia Gold/Silver Stock Index (ticker XAU).
Visually speaking, the slope of the returns on the XAU appear to peak somewhat ahead of the peaks in gold. Other hard data bears out the visual inspection. I created two simple compare-and-contrasts to show this, calculating a one-month lagged R-squared interchanging gold and the XAU as the independent variable upon the daily annual returns and the slope. The R-squared figures when gold was the independent variable was 30.5% upon the daily annual returns and 39.6% using the slope figures. In contrast when the XAU was the independent variable, the R-squared figures were 39% and 53%, respectively. It appears that gold stocks are a better leader of gold prices than gold prices are a better leader of gold stock prices. This relationship leads me to conclude that recent decline in the XAU- being more severe than the price decline in gold, for instance see here- is suggesting lower prices for gold.
You should notice the significant increase in the price of the GLD in Friday's trading (which is mirrored in the price of physical gold), which occurred on very light volume. What also should be apparent is that the rally since November 6 has been on contracting volume. This is in conjunction with a weak accumulation/distribution line, MACD and money flow figures that remain negative despite the rally, and a stochastic that is showing overbought conditions. To me this sets up a situation for lower prices in the GLD and gold, possibly setting up a price target of $158 on the GLD.
In addition, I think the track of gold stock prices suggest lower prices in gold. In one sense, this may seem counter intuitive, but the data bears it out. It also makes sense in that gold stock investors are continually looking ahead and discounting the future. The following charts shows the rolling 1-year slope of the annual daily returns for gold and the Philadelphia Gold/Silver Stock Index (ticker XAU).
Visually speaking, the slope of the returns on the XAU appear to peak somewhat ahead of the peaks in gold. Other hard data bears out the visual inspection. I created two simple compare-and-contrasts to show this, calculating a one-month lagged R-squared interchanging gold and the XAU as the independent variable upon the daily annual returns and the slope. The R-squared figures when gold was the independent variable was 30.5% upon the daily annual returns and 39.6% using the slope figures. In contrast when the XAU was the independent variable, the R-squared figures were 39% and 53%, respectively. It appears that gold stocks are a better leader of gold prices than gold prices are a better leader of gold stock prices. This relationship leads me to conclude that recent decline in the XAU- being more severe than the price decline in gold, for instance see here- is suggesting lower prices for gold.
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