One idea I've heard repeatedly in the gold community is that having the gold mining stocks go down while the general stock market and gold itself are not down is an imminent warning of a "gold take down". This is alot like the idea that "THEY" always do a gold takedown when the unemployment report goes out. Another one (click here) is "They always take the price of gold down for options expiration). All three of them anecdotally seem to be true, but none seem to hold up when I actually analyse the data.
Here's how I did my analysis of the "stocks down signals gold take down" idea:
- Throw the historical daily price data for GDX (gold stocks), SPY (S&P 500) and GLD (price of gold itself) into a spreadsheet with the dates lined up.
- Look for a day when, relative to the previous close, GDX is down more than 1% while SPY and GLD are either up or down by less than .2%.
- Look at what happens to the price of gold and the price of GDX one thru five days thereafter (close to close).
Here's the results:
The result is that for every duration and for both gold and gold stocks the price goes up (on average) for all those durations. This is particularly surprising given that the average includes that "outlier" bad results from the crash of 2008.
By the way, I don't despise those making this kind of observation. I appreciate their experience and these kinds of observations have to led me to significantl profitable short-term trade setups based directly and indirectly on those "THEY ARE MANIPULATING THE PRICE OF GOLD" thoughts. So, keep em coming and I'll just follow St Paul's advice from 1 Thess 5:21: "Examine everything carefully. Hold fast to that which is good".
Best wishes and let me know if I've got my analysis wrong or overlooked something. It won't be the first time.