Saturday, January 17, 2015

2015.01.16 Gold Cycle Model Chart

2015.01.16 Gold Cycle Model Chart

















The gold cycle model continues to suggest higher gold prices going forward. I wanted to illustrate the use of a Z-score using the differences between the current chart and a previous iteration of the model from October, 2014 shown below and also here in the blog. The high Z-score in the chart below, which passed "three sigma" implied a high probability of reversal, which indeed occurred.  Given the reasonable performance of this commodity model, I will be providing an extension of the model to 2025 as I did with the XOI.X model.

2014.10.31 Gold Cycle Model Chart

8 comments:

Anonymous said...

Thanks very much. I dont know many good models for foreseeing a turning point, this is by far the greatest. keep on going :)

- fanbase from germany

Paolo said...

You are very welcome, fanbase. A few salty grains of caveats: the commodities seem to follow better defined and, across time, reproducible price cycles. Equity time series, like my now moribund DJIA model, not so much. The other caveat is that the commodity models can sometimes undergo a phase transition, which can change the long term structure of the model. The silver cycle model was a good example of this. Hence it's reasonable to continue adding data and running the models on a periodic basis. Good luck and a happy and healthy New Year to you.

San Diego Jack said...

This is very good stuff Paolo.

I know you don't endorse trading off your chart models, so went to work on trying to pinpoint entry & exit dates, and would like to share my word document; https://drive.google.com/file/d/0B99-08tDocYtQVdOeGd3eXh1ems/view?usp=sharing

What do you think of my logic? And was this an exercise in futility?

Stephan said...

Dear Paolo,
thanks a lot for publishing your models for free. I already bought your Oil outlook - $10 is a very reasonable price. Where and when will your long term outlook for gold be available for purchase? At the moment I cannot find it...

Paolo said...

SDJ, that was a lot of work! Keep in mind that the predictive accuracy falls off with time. So perhaps the answer is that for time points > 6 months it might have been futile, but < 6 months it might be helpful. This is one reason why I run the models iteratively as new data is available. It is also why I make the Z-score available. In theory, as this is not trading advice, the goodness of an entry point is proportional to the magnitude of the Z-score at that time. A highly positive Z-score, say > 3 suggests an upcoming reversal up, and <-3 suggests an upcoming reversal down. However, the Z-score can also reach high values if the model is failing, which is useful to consider.

Paolo said...

Stephan, if you can wait a couple of days I will run a longer term model with more recent data. Thank you for your support!

San Diego Jack said...

You answered some future questions I had for you in your reply. Thanks.

It was a lot of work to make up that analysis, but it was worth it, for me.

And thanks for answering Stephan's question, as I was wondering about that too.

One last question: On your Oil & upcoming Gold outlook, are they updated as time goes by, or are they solid for the 10 year period?

A Jones said...

This is what gold *should* be doing, but it isn't, due to the massive derivatives that are at play. Banks are now selling massive paper contracts into the market at will, just at the push of a printer button.
So this cycle isn't reflecting what is happening in the manipulated market.