Sunday, October 5, 2014

2014.10.03 Gold Cycle Model Chart

2014.10.03 Gold Cycle Model and Z-score

















The gold cycle model, which has performed well in the past, continues to suggest a strong upward pressure in price since the model is past its turning point. The gap between the model prediction and the actual price continues to widen, as noted by the rising Z-score. It would be very unusual if the divergence was to exceed 2.5 on the Z-score without a reversal.  A previous model is shown below and here.



2014.09.05 Gold Cycle Model and Z-score

4 comments:

Anonymous said...

Thx Paolo! Gold looks very stretched against your model which seems to indicate an early October lift off. We will know soon.....

Anonymous said...

Hi Paolo, Can we expect DOW and S&P model from you?

Anonymous said...

Hi Paolo. Whats the current Z score on the Gold model? Do you see any changes on the model today?

Paolo said...

Done! I am not happy with the testing of the new DJIA and SP models, since both models fail in a miserable fashion forward-testing for any time point after 2009. In other words, a model developed with data up to 1990 does quite well testing on data after 1990 up to the 2009 time period, but then "goes off the rails." I think that the failure is due to the fact that these models are based on historical time cycles, which in the past did not include historically large liquidity injections as have occurred with QE. However, this is only a conjecture. The commodity models seem to be influenced less by monetary injection and more by fundamental drivers of commodity cycles, which include such things as a predictable lag time between price changes and supply changes based on cost of production.