A Quirky Chart, And What It Hints At

On a lark, I asked StockCharts.com to produce a chart that plots gold in terms of the SDR gold trust (GLD.) It may seem prolix, if not redundant, for me to do so - much like plotting an index fund versus the index itself. Sometimes, though, these charts can be revealing. Below is a copy of the weekly, with gold's value divided by GLD's. The average to the right is close to the stated value of 10 GLD shares per ounce of gold, but its exact value does show that GLD normally sells at a slight discount. [It takes a little more than 10 GLD shares to equal the value of an ounce of gold.] Right after it is a chart, using the same timeframe, of gold itself:




As the upper chart shows, gold and GLD are usually well correlated. However, there are certain times when each is out of whack with each other. Interestingly, gold tends to get ahead of GLD when it's toppy. When gold lags, it's bottomy. It's in mid-range right now, suggesting that gold's neither toppy nor bottomy.


The daily charts show less of a correlation, and are more prone to whipsawing, but the pattern is still evident:




One rule that can be drawn from the dailies, once the GLD share price and the gold price are pulled up: when an ounce of gold is selling for less than ten shares of GLD [10 * GLD share price], then gold's getting ready for a run upwards. [This rule might be useful to accumulators looking for buy points. I refrain from any comment regarding any other use, except to note that market timing is normally beaten by buy-and-hold over the long run.]


The exact link that'll call up the Gold:GLD chart is here. Clicking the link gives the daily. The weekly can easily be called up by adjusting the drop-down menu to the left of the top "Update" button.


Update: I did a more thorough survey of it, and found that a simple first-of-the-month accumulation plan is less expensive than a plan that uses this rule as an aid. That test done, I have no practical value for it. This relationship is, therefore, intended for reader interest (if not amusement.)