Comments (7)

• James Korman

  The poisonous mix of inflation, and Helicopter Ben's rate cut must ineffably lead a continuing rally in 'Au'

  Procrustes

  Published: September 19, 2007 1:18 PM

• DickF

  James,

  This crisis will give us a good chance to look at the impact of demand on the POG. A runup in gold is not a sure thing. I will be interested in where POG is in about a month. Remind me to take a look if I don't post something.

  Published: September 19, 2007 1:24 PM

• M E Hoffer

  I'd think the HUI might be a better index than the XAU for the simple reason that the co.s in the HUI are unhedged.

  Published: September 19, 2007 2:34 PM

• DickF

  We need to be careful placing too much weight on spot gold. Because of many long term instruments the effect of changes is not instantaneous but over a period of time. I have seen some who use 2 years, others use 10 years, and some even 20 years.

  The best measure I have found is a 10 year average weighted for the monthly gold price. The algorithm has been consistently within 10% of the reported core PCE 6 months before the final adjusted numbers are published. And when there are adjustments or a variance, the algorithm appears to be more accurate than the PCE.

  Published: September 19, 2007 4:16 PM

• MIDASs

  DickF-
  please explain:
  PCE?HUI?XAU?

  THANKS

  Published: September 21, 2007 12:21 PM

• M E Hoffer

  MIDASs,

  Re: PCE try http://www.dallasfed.org/data/pce/index.html

  1-877-RENT-A-CLU says, Re: XAU
  http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=XAU

  Re: HUI
  http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=HUI+gold+index

  Published: September 21, 2007 2:11 PM

• DickF

  Midas,

  The gold measure I am talking about is the Gold Volatility Model (GVM).

  Here is a description of the GVM by one of its developers. It is the only long term metric that I know that uses long term gold (10 yr) and spot gold. The combination of long term and spot prices adjusts the POG average to include long-term contracts as well as short-term influences to the POG. I have included the GVM forecasts so that those who are interested can record the forecasts and then measure them against the PCE themselves for accruacy.

  "The Gold Volatility Model, refers to a mathematical model that uses a long term moving average gold price and a monthly gold volatility factor to produce a prediction of the Core PCE index measure six months in advance. As an example the GVM using gold price information through the end of August '07 and a factor that is based on the change in monthly gold volatility through the end of August '07 recently produced a prediction that the Feb '08 Core year on year PCE measure will be 1.6 when it is published at the end of March '08."

  Published: September 24, 2007 10:37 AM