Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Best Simple Gold Indicator Around

Commodities / Trading Systems Nov 04, 2009 - 02:41 PM GMT

By: DailyWealth

Commodities

Best Financial Markets Analysis ArticleDr. Steve Sjuggerud writes: Just over 2% per year... that's all gold has gained since the end of 1979.

Gold sure hasn't done much.

If you look over the last 41 years, gold performed better... about 8% per year. It did well in the 1970s because of inflation fears – similar to fears we have now. Then gold did nothing for the 1980s and 1990s.


Today, I'll share with you an incredibly simple gold indicator that does an amazing thing... It captures the upside in gold, and it actually makes money when gold does nothing.

For the conclusion up front, this chart tells the story... The gold line is the price of gold, and the black line is the simple gold indicator. If you invested $10,000 using this indicator, it turned into $1.28 million.


As you can see, the gold indicator kept up with the price of gold in the 1970s... Then when gold went to sleep for 20 years, this indicator kept making money. And now that gold is going again, you're making big money.

The indicator is incredibly simple, too... It requires less than an hour of work a year to follow. Yet, since 1968, when this indicator said "buy," the price of gold rose at a compound rate of over 17% per year. And when this indicator said "move to cash," gold fell at a compound rate of worse than 2% per year.

The indicator is simple. You look at the price of gold once a month. You buy (or keep holding) if the price of gold is above its nine-month average. And you move to cash if it's below its nine-month average.

There's nothing magical about the nine-month average, by the way... You can use the eight-month, 10-month, and 11-month averages for "buy" signals, too. Same goes for the "move to cash" signals.

Testing this indicator since the end of 1979 gives similarly good results. In "move to cash" mode, the price of gold lost about 3% compounding per year. And in "buy" mode, gold gained around 7.5% compounding per year.

While 7.5% compound annual gains in buy mode since the end of 1979 doesn't sound as sexy as 17% a year since 1968, keep this in mind: Without this indicator, gold has only compounded at 2.3% a year since the end of 1979.

I've loaded you up with numbers here, but the concept is actually simple...

Own gold when it's above its nine-month average. Move to cash (earning interest) when it's below its nine-month average. Doing this simple thing since 1968 would have turned $10,000 into $1.28 million – for a compound annual gain of 12.5%.

The secret to the indicator, of course, is that it limits the pain of your bad years.

Consider this table of the 10 worst 12-month periods for the price of gold compared to how the simple indicator performed during those 12-month periods. Gold lost over 30% in every case. The worst the indicator performed was a 3% loss. Take a look:

I can't take credit for this simple indicator. My friend Mebane Faber wrote about a similar system in his book, The Ivy Portfolio. In that book, Meb describes why it works:

"When markets are declining people become more fearful and use a different part of their brain than during periods when markets are going up," he writes. So the reason it works is "rooted in human psychology."

Meb says it's "simple" and "timeless." And he's right.

You can make it a lot more complicated. But simple is elegant. A few minutes a year turned $10,000 into $1.28 million over 41 years, without any number gymnastics. Why make it more complicated?

Right now, the simple gold indicator says "buy."

Good investing,

Steve

P.S. Meb Faber will be speaking on Monday at our Stansberry Research Alliance Meeting in Kiawah, South Carolina. I look forward to seeing many of you there.


http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2009 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in