Be the first to like this
Upgrade of LMG's Global Tactical Asset Allocation system. Many people - both scholars and practitioners - suggested that gold is not a good leading indicator of stock market returns anymore.
Our research shows that this is a premature conclusion. But gold will only have leading indicator qualities when BOTH changes in the gold price return AND gold price volatility movements are taken into account.
At the same token: since gold prices are always expressed in USD with currency movements being quite hectic in today's world of changing relative powers of major currencies, we do also need to make sure that we first immunize the analysis for currency-related factors. We do so by first creating a composite indicator in which 4 major currencies play a role, and not just the US Dollar.
The gold indicator thus constructed reveals that - at the time of writing (end of year 2013) - markets might enter into a tougher phase in 2014 after the fantastic returns in 2013.