Friday, September 11, 2009

Assets In Rydex Gold Fund

Figure 1 is a weekly chart of gold. In the lower panel is the amount of assets in the Rydex Precious Metal Fund.

Figure 1. Gold v. Assets Rydex Precious Metal Fund/ weekly

At point 1, which was in 2002 and the bottom for gold, the amount of assets in this fund started to expand. At point 2, which was in mid-2003, the amount of assets in this fund expanded to new extreme levels. In my experience, this is typically what happens with data points at important secular turning points. Old extremes become useless and new levels are set.

Since that time in 2003, the amount of assets has been in a range. The current value (gray oval) is still below the mid-point of that range, and my interpretation is that the Rydex investor has yet to buy into the move in gold. From a contrarian point of view, this suggests higher prices for gold.

Past extreme values in the amount of assets in the Rydex Precious Metal Fund are noted with the red vertical lines. Interestingly at point 3, the extreme high in price back in 2008 was not heralded by an extreme high in the amount of assets.


Dave in Denver said...

Great post, Guy. I linked this post on my blog

getyourselfconnected said...

Excellent work! It amzes me how few hold gold.

Anonymous said...

What's the P/E on gold? How about the yield?

GG said...

"What's the P/E on gold? How about the yield?"
Thank God it doesn't have any - unlike corrupt American corporations.

Anonymous said...

According to the just reported CFTC data for the week ended Tuesday, the net spec long position in gold rose to an all time record high (dating back to 1993), up 22% on the week to a net 225k contracts. Silver net longs rose to the most since Aug ‘08 and net longs in platinum rose to a record high. Most other commodity changes in position were little changed and remain range bound.

couple that with the fact that only 2% of investors are bullish on the dollar and you arrive at a top imho. thanks though for the info. always enjoy your work.

rigger mortice said...

'What's the P/E on gold? How about the yield?'
you can eat it.