The Hidden Behavior Behind the Price of Gold
Editor's Note: Analyst Don Lindley has spent a great of time and effort in building a "COMEX Gold Futures Price Database." For the most it is now complete from the beginning of 1985 to the present. With his formidable gold data base, Analyst Lindley has developed several intriguing studies, which are delineated via several thought provoking graphs.
Don Lindley
The initial batch of graphs covered the time frame from 1992 to 2002. The objective was to answer the question: Is "gold" breaking out as it did in 1993? Initial data suggested it has. Well now by expanding the database back to the being of 1985 to 2002 I have enclosed the first updated graph of this study, on the "Price Direction Accumulated Open Interest" as you can see the "behavior" of open interest with respect to price over a large period of time, does "flag" major market tops and bottoms as shown, so now the question is are we at or nearing a top in the price of gold?
From the initial data that I am looking at, I would still like to think the answer is still more up. Clearly if gold has made a major double bottom back in mid 1999 to 2001, then it would imply that we could have a much larger up move then prior tops and bottoms, suggested by this graph. So my next step is to once again expand the data base backwards in time, to the mid 1970's
just prior to gold making it's explosive up move to 800+ dollar top. This will take some time, but the wheels have been placed in motion this week with the ordering of the data.
Study this graph carefully, save it, I will be shortly sending out another one which is the "combined" open interest with respect to price. Which I think you will find even more useful.....
Also enclosed are my integrated graphs of "Backwardation and Zero Contango" days with my NET accumulated open interest, I think you will find these charts extremely interesting. I present you with several views.
Now please note what happened during the summer of 2002 with the "Backwardation and Zero-Contango" data clusters, and else where on these graphs. Generally when a "cluster" of event days occur, it is a very important flag" that "Wall Street" is very nervous about the direction in markets, (increasing uncertainty) which gold reacts to generally with higher prices. Now we are now several months away from the last data cluster of "events", that occurred in early to mid summer 2002 and YET GOLD HAS YET TO REALLY REACT TO THE UPSIDE? Is it that it is just now starting to react in a "delayed" fashion or is it that we have something "transparent" going on that it won't be allowed to happen? In either case 330 gold is now a very serious issue I suspect in the OTC gold derivatives market, all my open interest, and data analysis of COMEX gold market prices, suggest that gold should in fact be say at least 30 to 40 dollars higher RIGHT NOW!!!! and yet we aren't. Clearly this market is under an extremely strong "influence" of something other then just the behavior of New York gold trading, and gold market supply/demand fundamentals. But what?
You be the judge by viewing these graphs:
Cheers to all this holiday season.
Don Lindley
9 December 2002
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