Gold Price: Is This Rally Sustainable?

London (Jan 13)  Summary•Despite an ongoing rally in gold prices, the American investors are still cutting their gold holdings.

•On the other hand, the COT report delivers the data supporting a bullish thesis on gold (for example, the US dollar seems to be ripe for a trend reversal).

•As a result, the big picture is very unclear. Therefore, I advise caution.

The SPDR Gold Shares (NYSEARCA:GLD) is one of my favorite indicators applied for measuring the state of the gold market. However, some of my readers criticize me for using this indicator. There are two main arguments against it:
•doubts about the reliability of the data delivered by GLD
•reservations about the efficiency of the trading signals delivered by GLD

I am quite far from discussing these arguments because it would probably be extremely boring for the readers. What is more, I do not want to make a fuss about it. Instead, I would say this:

"As far as any indicator works I will be using it. GLD is no exception from this rule"

I guess that this statement comes from Karl Popper's works. For example:

"…he (Karl Popper) goes on argue that scientific theories are distinguished from non-scientific theories by a second sort of boldness: they make testable claims that future observations might reveal to be false. This boldness thus amounts to a willingness to take a risk of being wrong. On Popper's view, scientists investigating a theory make repeated, honest attempts to falsify the theory, whereas adherents of pseudoscientific or metaphysical theories routinely take measures to make the observed reality fit the predictions of the theory"

Of course, I realize that being too scientific in financial markets may be a nice recipe for a disaster but over the last year GLD worked quite well as an indicator.

Source: SeekimngAlpha