Special Post About Gold To GLD Indicator

Although this indicator is presented as an item of reader interest, I'm making this special post because a glitch in Stockcharts.com's data this morning obliterated a dip in its value below 10 yesterday. So, I've edited out the section in the morning report that deals with it and am making this special post here.

The indicator consists of dividing the gold price by the price of one GLD share. When that ratio is below 10, indicating that physical gold is selling at a discount to GLD's "paper gold," gold is supposed to rise. I began reporting it with high hopes, but found later that it's too much of a laggard to rate using it in a time-targeted buy-and-accumulate plan.

Here's a post-glitch Stockcharts.com chart, showing that the below-10 level was triggered yesterday. Just below it is the chart for gold itself. Both are six-month daily charts:





Yesterday's low in the ratio, 9.94, was below the low made in the beginning of January. Unlike some others, this below-10 reading came on the first day of a strong rally. Some have come on the second day.

Since this item is presented as a matter of reader interest, the speculations below should be taken in that spirit:

The two closest precedents to yesterday and today's behavior were the below-10 hits on September 2nd and November 3rd. The latter presaged a November rally that's still remembered today. The former foreshadowed a much quieter rally, which saw gold inching up after a second day of strong gains ended. The performance of gold itself yesterday and today is similar to September's because the second day's gains were weaker than the first day's for both. The chief difference between September 3nd's follow-up gain and today's is, today's is weaker still. To the extent that the gold-GLD indicator is a valid interpretative tool, it (when combined with the gold chart itself) is suggesting that gold will inch up from here. We might get a trading range in the nesxt couple of weeks.