Reseachers Find Gold Stocks Move in Predictable Patterns

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A team of international researchers claims to have identified a pattern in the gold market that has been predicting the movement of gold stocks – with 88% accuracy – for the past 23 years. They have dubbed it the “X5 Indicator.” The research was conducted by The Sovereign Society, an independent investment research firm with offices in Delray Beach, Florida and Baltimore, Maryland. The group has published full details of the indicator and their study and are making it available for public review.

I’m hesitant to report the actual numbers because they seem so fantastic. But the average return of the 216 gold stocks in this survey was actually 401% from trough to peak.

A team of international researchers claims to have identified a pattern in the gold market that has been predicting the movement of gold stocks – with 88% accuracy – for the past 23 years.

Using high-powered financial databases, including Bloomberg Market Data, and the findings of PhD’s from Northeastern Illinois University and Wharton, they were able to identify a recurring phenomenon in the markets that has turned out to be a very reliable predictor of sharp rises in gold stocks. They have dubbed it the “X5 Indicator.”

Erika Nolan, Executive Director of the Sovereign Society explained, “It takes its name from the Philadelphia Gold and Silver Index – which factors highly into our financial models. Specifically, when this index trades at five or more times the price of gold and forms a V-shaped pattern, nine out of ten gold mining stocks rally.”

“I’m hesitant to report the actual numbers because they seem so fantastic. But the average return of the 216 gold stocks in this survey was actually 401% from trough to peak.”

The test was conducted using data from 216 mining stocks between 1986 and 2009. In addition to the X5, the predictor included a unique combination of three other factors that, when present together, formed a rare yet highly accurate “trigger.” These other factors include forward sales, mining expenses (per ounce), and the price of the stocks – relative to their production potential.

The research was conducted by The Sovereign Society, an independent investment research firm with offices in Delray Beach, Florida and Baltimore, Maryland. The group has published full details of the indicator and their study and are making it available for public review—with the goal of generating further feedback and third party confirmation— on their website.

According to Patrick Bove, a researcher who worked on this study, since launching this testing phase on August 10, 2009 – the X5 has recommended two mining companies as “long” candidates. One of them, Kinross Gold (KGC) has fluctuated between $18.18 and $19.86. The other – a small cap Canadian miner has seen its shares jump from $2.56 to an August 24th high of $3.18.

It is unclear how long this pattern will remain effective. However the indicator has been triggering for the past eight months – over which time 77 mining stocks have responded with gains of 100% or more.

Executive Director of the Sovereign Society, Erika Nolan said, “The X5 Indicator program is our most successful gold research to date. It has proven to be effective regardless of bullion prices. As long as you buy when this indicator is triggering – history shows you should come out ahead.”

Nolan’s team has followed on the heels of academic giants – from Wharton to Texas A&M. Building on past gold research has allowed the Sovereign Society to leverage the knowledge of several PhD’s and dozens of studies to refine their “X5 Indicator.”

The team was inspired to investigate gold stocks further after a number of University professors, including Wharton’s Jeffrey Jaffe, Ph.D. and Northwestern Illinois University’s Gerald Jensen, PhD concluded mining stocks were the most profitable gold investment of the past 30 years.

To learn more about the X5 Indicator and the Sovereign Society’s Commodity Trend Group, visit them at their website.

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Sarah Barnett
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