How the Sentiment Indicator Works
In its most basic form provided in the chart above, the sentiment indicator suggests a top or a bottom in the gold price or a major change in direction of a trend line when the sentiment indicator spikes. The sentiment indicator is based on a number of variables related to website traffic on goldprice.org and other popular gold and silver websites around the world.
The previous spikes in the sentiment indicator correlate well with the last five major tops and bottoms in the price of gold during 2006. We have displayed a chart of one component of the sentiment indicator that is quite accurate, although the sentiment indicator has many components, which help to determine if a spike is associated with a top in the gold price, a bottom or a signal of an approaching break out to the upside or downside.
Below is a brief history of the major signals provided by the GOLDPRICE.ORG Gold Price Sentiment Indicator in 2006.
Top 1. Occured on the 16th of April 2006, when the gold price broke out to the upside above $600 US. You can see that the sentiment indicator registered $600 as being very significant and it forecast the start of the major run up in gold prices from $600 to $730.The gold price ran up the next few days and had an intermediate top on 20th of April at $645 then fell back to $607 US on the same day before proceeding sharply higher to $730.
April 10th, 11th and 12th appear as the smaller peak proceeding Top 1 and hinted at the move that lay immediately ahead. It appears that continued elevated levels in the sentiment indicator without a spike are associated with the days prior to a major break out to the upside in the gold price.
Top 2. Was the biggest spike in the sentiment indicator since its inception and it occurred on May 10th and 11th, it provided a clear indication that the gold price was about to reach a major top, and that top took place on May 12th when the gold price hit a high of $730 per ounce.
Bottom 1. The major bottom in the sharp downtrend from the May 12th high was suggested by another major spike in the sentiment indicator which occured on June the 13th. The gold price hit a bottom of $542 on June the 14th and has been rising since then. The size of this spike in the sentiment indicator gave a clear signal that a major bottom had occurred.
Top 3. Was another spike in the sentiment indicator marking an intermediate top in the gold price. The sentiment indicator was showing a spike on July 13th, the intermediate top in the gold price came a few days later on July 17th at $676 US.
Bottom 2. The sentiment indicator spiked on July 24th marking another bottom in the gold price. The gold price bottomed at $602US on the 24th of July.
Top 4. The sentiment indicator was at an elevated level on the 31st of July but did not form a spike. We have interpreted this as an intermediate top but its possible the sentiment indicator is alerting us to a possible break out in the gold price from its current triangle formation in the near future, as its pattern is similar to the days before the break out above $600 prior to Top 1, which occurred in Mid April 2006, when gold ran from the break out above $600 up to $730.
August 1st, 2nd and 3rd have all showed elevated levels in the sentiment indicator, this level of continued strength in the sentiment indicator without a spike is generally associated with a break out in the gold price ahead. We shall see.
1 comment:
The GOLDPRICE.ORG Gold Price Sentiment Indicator has spiked on the 7th of August. This suggests a big move in the gold price will take place in the next few days either up or down.
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