SystemTrader's Gold Mutual Fund Timing Model

[SystemTrader]

I've posted a few buy/sell signals for gold mutual funds in another thread, so I thought I'd start a new one for my current signal and future ones. The last buy signal I posted in the other thread is still "on":

Bought at 5/10 close:

Rydex Precious Metals Fund (RYPMX) at $31.75

Theclosing value of the Gold & Silver Sector Index (^XAU at Yahoo Finance) was 84.17


I'll post the sell signal whenever the system tells me to. Other thangiving new signals and occasionally updating return figures, I probably won't post much here.

Because there are many gold mutual funds, I will only track the XAU (Gold& Silver Stock Index) from now on. This is just like tracking theS&P 500index for ageneral U.S.stock market timing system.

While gold funds are volatile, they can also be profitable and act as a hedge against other investments. For example, in 2002 the S&P 500 had a 23% loss while the XAU gained 41%. Personally, I have a small position in gold funds as a permanent buy-and-hold, but prefer to time them to maximize the returns while avoiding their worst volatility and drawdowns.

The thread where I've posted earlier signals:

http://www.tsptalk.com/mb/forum25/390.html

[SystemTrader]

A quick update: the XAU closed at 99.01 today (9/2/05), up about 15% from the original buy signal in May. It went all the way to 99.94 during the day. If it can break 100--a psychologically important round number for traders--it could push on further. If it fails to surpass 100, itmay fall back and retest support in the 90-95 range.

A lot will depend on how the U.S.Dollarperformscompared to other currencies. If the Fedactually does slow down or stop interest rate hikes, it will be bullish forgold and bearish for the USD.It'salso worth mentioning that Septemberhas historically been a bullish month for gold.

ST

SystemTrader wrote:

I've posted a few buy/sell signals for gold mutual funds in another thread, so I thought I'd start a new one for my current signal and future ones. The last buy signal I posted in the other thread is still "on":

Bought at 5/10 close:

Rydex Precious Metals Fund (RYPMX) at $31.75

Theclosing value of the Gold & Silver Sector Index (^XAU at Yahoo Finance) was 84.17


I'll post the sell signal whenever the system tells me to. Other thangiving new signals and occasionally updating return figures, I probably won't post much here.

Because there are many gold mutual funds, I will only track the XAU (Gold& Silver Stock Index) from now on. This is just like tracking theS&P 500index for ageneral U.S.stock market timing system.

While gold funds are volatile, they can also be profitable and act as a hedge against other investments. For example, in 2002 the S&P 500 had a 23% loss while the XAU gained 41%. Personally, I have a small position in gold funds as a permanent buy-and-hold, but prefer to time them to maximize the returns while avoiding their worst volatility and drawdowns.

The thread where I've posted earlier signals:

http://www.tsptalk.com/mb/forum25/390.html

[Rolo]

Oh, man! I wish I were around to see this (and the other) thread.

Since Jul '04 I've added metal funds to compose 25% of my portfolio:

PSPFX (my favourite)

RSNRX (close second, but moving to #1 lately)

UNWPX (not totally happy with it, will probably trade it, closest to RYPMX)

QRACX

Van Eck WW Hard Assets R (no ticker)



This latest run-up has me contemplating selling all/most of them to avoid a heavy fall/pullback.

[SystemTrader]

Another quick update. The XAU broke 100 last week and closed at 102.68 today. Gold and gold stocks have remained strong even as the U.S. Dollar has been gaining on other currencies, which is very unusual.



SystemTrader wrote:

A quick update: the XAU closed at 99.01 today (9/2/05), up about 15% from the original buy signal in May. It went all the way to 99.94 during the day. If it can break 100--a psychologically important round number for traders--it could push on further. If it fails to surpass 100, itmay fall back and retest support in the 90-95 range.

A lot will depend on how the U.S.Dollarperformscompared to other currencies. If the Fedactually does slow down or stop interest rate hikes, it will be bullish forgold and bearish for the USD.It'salso worth mentioning that Septemberhas historically been a bullish month for gold.

ST

SystemTrader wrote:

I've posted a few buy/sell signals for gold mutual funds in another thread, so I thought I'd start a new one for my current signal and future ones. The last buy signal I posted in the other thread is still "on":

Bought at 5/10 close:

Rydex Precious Metals Fund (RYPMX) at $31.75

Theclosing value of the Gold & Silver Sector Index (^XAU at Yahoo Finance) was 84.17


I'll post the sell signal whenever the system tells me to. Other thangiving new signals and occasionally updating return figures, I probably won't post much here.

Because there are many gold mutual funds, I will only track the XAU (Gold& Silver Stock Index) from now on. This is just like tracking theS&P 500index for ageneral U.S.stock market timing system.

While gold funds are volatile, they can also be profitable and act as a hedge against other investments. For example, in 2002 the S&P 500 had a 23% loss while the XAU gained 41%. Personally, I have a small position in gold funds as a permanent buy-and-hold, but prefer to time them to maximize the returns while avoiding their worst volatility and drawdowns.

The thread where I've posted earlier signals:

http://www.tsptalk.com/mb/forum25/390.html

[Rolo]

SystemTrader wrote:
Gold and gold stocks have remained strong even as the U.S. Dollar has been gaining on other currencies, which is very unusual.
Indeed! I took my finger off the button...I didn't sell my TSP funds for profit-taking, I dunno why I wanted to do it to my XAU funds.

What would you say a healthy correction would be vs. a decline?

[SystemTrader]

Rolo,

That's kind of hard to say since gold funds are pretty volatile. However, I'd say you could do one of a few things:

1) Set a stop loss (e.g., XAU at 97) at which you'd sell and a target (say 105 or 110) at which you'd also sell. It will hit one or the other before long.

2) Since September is usually a good month for gold, you could sell at the end of this month as long as the price stays strong.

3) You could do a "trailing stop." Like (1) above, set it initally around 97, and for every4-5 points the XAU (or your fund) goes up, move the stop up by the same amount. Some analysts are very bullish on gold. If they're right, this method may keep you in long enough to enjoy more gains.

I think 100 is a pretty critical level. It may drop below 100 temporarily, but if it does for an extended time, or if drops very far below 100, it's not a good sign.

ST





Rolo wrote:

SystemTrader wrote:
Gold and gold stocks have remained strong even as the U.S. Dollar has been gaining on other currencies, which is very unusual.
Indeed! I took my finger off the button...I didn't sell my TSP funds for profit-taking, I dunno why I wanted to do it to my XAU funds.

What would you say a healthy correction would be vs. a decline?

[SystemTrader]

The XAU keeps shooting up. It closed at over 110 on Friday. That's a gain of about 30% from our buy signal in May. The question now is whetherthisincrease willcontinue. Last Novemberthe XAU reachedthis same level briefly, but couldn't move any higher. See the chart below. If it stalls here, it may go back to test 100 or even a lower point.However, if it breaks through 110 convincingly, then it's hard to say what thenext majorresistance level will be.

http://chart.finance.yahoo.com/c/1y/_/_xau

[SystemTrader]

Duplicate post--I'm not sure if I can delete this myself?

[SystemTrader]

Update from last week: the XAU looked like it may charge through the 110 area. It exceeded 113 during intraday trading on Monday, and closed at 111.49 on Wednesday. However, the U.S. Dollar madelarge gains against other currencies, and this finally started depressing XAU/gold prices. It closed at 109.41 on Friday.

This week may be the "make or break" for the XAU. It will probably moveout of this109-111 level soon, either breaking out tonew highs or going backdown to previous levels (100-105 range or even lower).



SystemTrader wrote:

The XAU keeps shooting up. It closed at over 110 on Friday. That's a gain of about 30% from our buy signal in May. The question now is whetherthisincrease willcontinue. Last Novemberthe XAU reachedthis same level briefly, but couldn't move any higher. See the chart below. If it stalls here, it may go back to test 100 or even a lower point.However, if it breaks through 110 convincingly, then it's hard to say what thenext majorresistance level will be.

http://chart.finance.yahoo.com/c/1y/_/_xau

[SystemTrader]

Our gold timing signal has given a sell signal, so we'll close the trade that we've been in since 5/10/05. I'll update the return percentage for this trade after the close tomorrow.

Note: this doesn't affect the gold position in my Fidelity Select Timing portfolio. That's a separate system and it abides by Fidelity's "must hold 30 days" rule. I must admit I'm a little cautious about the gold fund in that portfolio, since gold has historically done very well in September but poorly in October. But we'll just have to wait and see how it does. If the XAU can take out the next few round numbers (115, 120, etc.), it could continue to rise.

So again, for the official gold timing system, we will be closing our positions on 3 Oct. And it's been quite a ride since early May, as the chart below shows!


http://chart.finance.yahoo.com/c/1y/_/_xau

[SystemTrader]

Gold closed at 112.35 yesterday, 10/3/05. The gain from the 5/10/05 buy signal to yesterday's close was 33.47%.

Until the next XAU buy signal...,

ST



SystemTrader wrote:

Our gold timing signal has given a sell signal, so we'll close the trade that we've been in since 5/10/05. I'll update the return percentage for this trade after the close tomorrow.

Note: this doesn't affect the gold position in my Fidelity Select Timing portfolio. That's a separate system and it abides by Fidelity's "must hold 30 days" rule. I must admit I'm a little cautious about the gold fund in that portfolio, since gold has historically done very well in September but poorly in October. But we'll just have to wait and see how it does. If the XAU can take out the next few round numbers (115, 120, etc.), it could continue to rise.

So again, for the official gold timing system, we will be closing our positions on 3 Oct. And it's been quite a ride since early May, as the chart below shows!


http://chart.finance.yahoo.com/c/1y/_/_xau

[SystemTrader]

After a long break, the Gold Fund Timing Model has sensed another signal...

Buy the XAU (use "^XAU" to find it on Yahoo Finance) tomorrow, 3/13/06, at the close of the market. I use the XAU to track my signals, since it's an index for gold stocks just like the S&P 500 is for the broad stock market. For practical purposes, you'd have to buy your favorite gold or precious metals mutual fund.

I'll post an update with the "buy" price and track it in this folder.

[SystemTrader]

To follow up on my post over the weekend, the system entered the XAU at yesterday's closing value:

Buy XAU at 127.75 on 3/13/06

I'll post again when I close this position.

ST


After a long break, the Gold Fund Timing Model has sensed another signal...

Buy the XAU (use "^XAU" to find it on Yahoo Finance) tomorrow, 3/13/06, at the close of the market. I use the XAU to track my signals, since it's an index for gold stocks just like the S&P 500 is for the broad stock market. For practical purposes, you'd have to buy your favorite gold or precious metals mutual fund.

I'll post an update with the "buy" price and track it in this folder.

[SystemTrader]

I'll be selling and closing this XAU position COB tomorrow, 3/20/06. I'll follow up with the closing price and gain/loss. (Should close out with a gain unless there's a huge drop tomorrow. There's currently a gain of slighly over 3%.)



To follow up on my post over the weekend, the system entered the XAU at yesterday's closing value:

Buy XAU at 127.75 on 3/13/06

I'll post again when I close this position.

ST