This is a strategy for timing long entries into the gold miner index ticker $XAU. There is a tracking etf for the $XAU which is ticker GDX. Here are a list of the XAU index components and percentage makeup. Barrick Gold ABX 20.00% Freeport McMoRan FCX 16.10% Goldcorp GG 15.30% Newmont Mining NEM 11.90% Kinross Gold KGC 7.60% Silver Wheaton SLW 5.40% Yamana Gold AUY 4.70% Agnico Eagle AEM 4.50% AngloGold Ashanti AU 3.20% Randgold Resources GOLD 2.60% Buenaventura BVN 2.50% Gold Fields GFI 1.80% Royal Gold RGLD 1.60% Pan American Silver PAAS 1.40% Silver Standard SSRI 0.90% Harmony Gold HMY 0.60%
The strategy is to simply buy gold mining stocks when they become cheap relative to an ounce of gold then sell after a period of time or if gold stocks become expensive compared to gold.
Buy if the spread ratio between XAU / gold is in the bottom 38% based on a 95 week look back. Then sell in 11 weeks or if the spread ratio between XAU / gold is in the top 98% based on a 95 week look back.
Buy if the spread ratio between XAU / gold is in the bottom 32% based on a 58 week look back. Then sell in 4 weeks or if the spread ratio between XAU / gold is in the top 80% based on a 58 week look back.
Below is an equity curve of the Gold stock trading strategy. Since 1985 ,$100 would have compounded into $7,070 a 17% annualized rate of return with a maximum drawdown of -33%. As a comparison a buy and hold in the XAU would have grown $100 into $256 a 3.6% annualized rate of return with a maximum peak to trough drawdown of -71%.
Below is the performance report based on trading 1 share of the XAU index since 1985 using weekly bars. The average trade of $3.7 is equivalent to to 4.1%. The average # of bars in trade is 6.5 weeks.
Below you will find a table that shows how each one of the XAU components has performed when these signals were given. Each trade was based on a $10,000 investment.
Receive signals to this XAU timing strategy with any one of our subscription options. Details here.