it's ground hog day ..., page-5

Not quite right Rabbitoh, as a chart of the XGD Gold Index shows.

However, what I have found very interesting is when this chart of the XGD Gold Index is compared to the GOLD ETF, using it as a proxy for the Australian dollar price of gold.

Over the 5 years it has shown that the XGD Gold Index has risen by nearly a similar percentage as the Australian dollar price of gold! Though of course during the 2008 GFC panic and lemminglike rush to the "safety" of the US dollar there was a temporary disparity as gold shares got smashed, gold got smashed, but the Australian dollar was smashed even more, causing the Australian dollar gold price to rise.

Of course gold shares are meant to provide leverage to the gold price, which at present has not occurred, with the XGD Gold Index significantly underperforming the US dollar rise in gold and only rising about a similar percentage as the Australian dollar percentage rise in gold.

There are some conclusions that can be drawn.

1. Gold shares are still currently undervalued.

2. While the US dollar gold price is very significant for day to day market sentiment, we also need gold to rise in Australian dollars with at the same time a firm US dollar gold price.

3. At A$1400 the gold price has finally reached a level where an increase from A$1400 to A$2000 should be much, much more significant than an increase from A$800 to A$1400 as the increase from A$1400 to A$2000 should all be real profits, unlike the increase from A$800 to A$1400.

4. I'm waiting for the US dollar gold price rises to outperform any rises in the Australian dollar. The ideal scenario of course would be a rising US dollar gold price accompanied by a falling Australian dollar.