Tuesday, April 16, 2013

Gold's Volatility

A few posts back I showed how gold's parabola was progressing and was comprised of three line segments. An updated chart follows below and it appears price has fallen such that the three line segments have been reduced to two line segments.

Click on any chart to ENLARGE
I've been curious to see how the recent volatility in gold compares with the history beginning in 2001, so I made a  simple indicator to give me some readings for comparison. 

The indicator plots a histogram that measures the percentage change in the height of the daily candles. For starters I was looking to see which single days exhibited the greatest % difference between their candle high and low. Then I expanded the study to show me the greatest % difference over any two consecutive day period.

The purple trend line in the above chart is the same trend line mentioned in the first chart - that is a continuation of the second (magenta) line segment.

My little study was yielding interesting results so I continued it to 5 days, 20 days, 50 days and 200 days.

The simple conclusions this data offers us is more validation that we have witnessed a volatile event of unusual proportion. To date, it compares favorably with the volatility of 2008. 

Will it measurably exceed the rampage of 2008? I guess we'll know soon enough.


  1. John,

    what do you mean by exceeding the rampage of 2008.. do you mean more downside selling pressure????

  2. Using measurements of 1, 2, 5, 20, 50 and 200 days, our current experience has been similar to 2008. I don't think it has exceeded it. At least not yet.

  3. Hi John,

    I know you guestion fatcat/institution manipulation so you have got to see this.


  4. Dear John,

    Hoping that you would be able to sell NUGT at a profit is a pipe dream let alone all your miners. As an example, HGU (leveraged gold bull etf in TSX) hit $31.75 in the summer of 2008 before the financial crisis. At the time, as we know Gold was below $1000. When gold hit $1900 in 2011, HGU was only able to go up to $19.46.
    Gold price was more than $900 higher, but the price of the etf was more than $10 lower!! You do the math!!
    With decay factor and after such a brutal smackdown in the last a few days, NUGT will not be able to recover to the price you are hoping.
    Besides, with the damage done in the last a few days, it will take a long time (maybe years) before Gold price reaches a new high (if it ever does). Sitting on massive losing positions without being able to do anything at all is quite a depressing thought. Please understand that I'm not writing this to attack or insult you at all. But sometimes it seems necessary to accept the cold and brutal reality as is and live with it.

  5. I understand what you are saying and understand that you write out of genuine concern and not to hurt me. And I further understand that in your reality, what you have written makes complete sense to you. So I thank you, absolutely.

    But I suppose it also fair to say that our realities do not square with each others. That is OK because that is what makes a market - all kinds of points of view trying to assert themselves as truth and make a buck at the same time.

    I believe very strongly that I *know what I am doing* and have absolutely no inclination to back down from my plan.

    And I do, again, thank you for taking the time to share your thoughts with me.

  6. John, to the commenter above - i agree, the miners will not make those highs everybody is dreaming about. This was a plan from the beginning when they were pushed to the retail public so heavily for years. The metal may put on a fight but the miners are a walking corpse IMO.

    There is only one reality in this business. Market. It is never wrong. Opinions are. What tells if one is wrong or right? Account balance. If it is growing - one is right. If it is evaporating one is wrong. That is the only truth in this business of speculation.

    Thanks for the blog.

  7. Thank you Anji for your thoughtful comments. I think we
    will have to agree to disagree for now, but you have a
    point of view that I am sure is popular with many.

    1. I dont think my point of view is popular with many John. I have not purchased a single gold stock in last 3 years as everybody was "averaging in" wishing and hoping for higher prices.

      One must never average into losing positions.

      ..and honestly i do not care what "many" think, all i care about is growing and protecting my account balance. The "many" you speak of im afraid are holding some big empty bags right now..