NEW YORK TradingEducation -- Gold is a portable store of wealth.

As such, demand for gold and the price of gold rise in time of war, fear of war, fear of confiscation, and flight to safety. For most of recorded history, gold has been dormant except for such times of fear. Modern researchers armed with the latest quantitative tools complicate gold price analysis with intermarket relationships between various financial instruments.

I tested dozens of relationships and ranked the results see table at the end of this report.

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To simplify, I sampled The three-month Treasury-bill and year Treasury-note were cash market interest rates. The forex, silver and gold prices were the front-month futures contracts.

A simple way to find out if a financial instrument is trending is to run the price against a variety of Exponential Moving Average crossovers EMA of various lengths, one of the best-performing technical market indicators featured in my book, The Encyclopedia of Technical Market Indicators. Weeks" in the table is the best, optimal length of the EMA that produced the maximum profit.

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The rule is easy to understand: For direct trend following, when the price crosses above the EMA, that is a buy signal; when the price crosses below the EMA, that is a sell signal. But if the relationship is an inverse one -- that is, when one instrument rises, the other tends to fall -- then we reverse the rules: For inverse trend following, when the price crosses below the EMA, that is a buy signal; when the price crosses above the EMA, that is a sell signal.

The most useful EMA indicator for trading gold over nearly 32 years was to buy gold when the U. Gold moves directly with the trend of the Swiss franc using a 5-week EMA crossover and the trend of crude oil using a week EMA crossover.

These make good intuitive sense: Gold should go up when the Swiss franc a hard currency with gold backing and crude oil another inflation-sensitive commodity are rising. My testing found an inverse relationship with gold and year T-note yields. This might be spurious, however, because it lacks logic and has been unprofitable since , as year interest rates and gold both rose together. Stocks are not always a good hedge against inflation, and this indicator's Cumulative Equity Curve is too erratic to be reliable.

I conclude that the U. As this is being written, all three are below their EMAs, so the current evidence is mixed. A serious student of investing for nearly 40 years, Colby is the author of The Encyclopedia of Technical Market Indicators. By using this site you agree to the Terms of Service , Privacy Policy , and Cookie Policy. Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information.

All quotes are in local exchange time.

Real-time last sale data for U. Intraday data delayed at least 15 minutes or per exchange requirements.

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These indicators have been much more profitable than the trend of the gold price itself. T-bill inverse 58 More Coverage Do you need to pay off your mortgage before you retire?

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