The Big Picture | Theoretical Price of Gold (1960 - 1982) | Theoretical Price of Gold (1983 - Current) | Gold Wave Analysis ($US)  | Gold COT ($US)Gold/XAU Ratio
 Gold/API Ratio | Australian Gold ETF 

Gold/XAU Ratio


This looks at a ratio of the Gold price divided by the XAU (Philadelphia Gold and Silver equities index). Gold shares tend to typically lead the metal and provide a barometer of sorts when it comes to predicting the movement of the gold price or the gold equities themselves. When the gold price rises without the gold shares outperforming the gold price this is a warning that any intermediate term rally in both the metal and the gold equities may be heading for a temporary correction. Alternatively if the gold shares fail to underperform the gold price as the gold price falls, this may indicate that the gold price and the gold shares are approaching a bottom in the correction and consolidation process which may offer a desirable entry point. The chart above is a weekly chart and starts with the Gold/XAU ratio in the bottom section where trends both up and down are followed carefully for clues of potential changes. A move higher indicates the gold price is outperforming the gold equities and generally occurs when the gold price is falling. A move lower in the ratio is bullish and usually occurs when the gold price is rising and the equities are outperforming the metal. The middle section of the chart looks at the XAU ratio on its own. The top section is an RSI of the ratio itself and provides us with more insight as to whether a particular trend is overextended. A move above 70 implies gold shares are oversold relative to the gold price and provides a heads up for a potential change in the trend. A move of the RSI below 30 signals the gold share may be overbought relative to the gold price and the probability of a correction increases. At this point we watch closely for a potential change in the trend of the ratio. The free monthly newsletter we provide analyzes these trends on a regular basis.