The first component, a trend-following indicator on the monthly gold chart, has delivered a sell signal back in December 2011 and has stayed bearish for nearly four years in a row. Many traders and investors could have saved themselves from a lot of pain and drama just by using this simple indicator.
With the weekly and daily chart, the model zooms deeper into the short-term price developments. After that a simple signal based on volatility is included. Generally an increasing volatility occurs in downtrends while uptrends are usually accompanied by low or falling volatility.
With the Commitment of Trades Report and the sentiment numbers two countercyclical (“contrarian”) signals are following. While the professionals currently see only little need for hedging, the mood in the Gold market can only be described as “excessive pessimism”.