Wednesday, April 15, 2009

The kitco traffic indicator has flashed a gold buy signal

This little signal is not back-tested over a longer period of time but has worked in the recent past and is fun for me to watch. Monitoring the internet traffic (i.e. number of website visits) at mainstream gold site using traffic data can be a way to make contrarian bets. Gold and gold stocks are in a secular bull market, yet the average retail investor loses interest in gold (using traffic as a proxy for retail interest in gold) at exactly the wrong time - right before bull thrusts higher! This allows the bull market to carry as few riders on its back as possible. Spikes higher in traffic also can portend tops in the market as retail investors only start to buy when the price has gone up significantly.

Anyway, below is a 3 month traffic chart for to show yesterday's traffic data chart spike in better detail and below that is a longer-term traffic chart going back to August, 2008. I have drawn arrows of interest to show traffic spikes:

The chart below shows the daily price of gold over the past 2 years with arrows drawn in to correspond to the times of the traffic spikes from the charts above.

Not a bad indicator in recent times, eh? If you are interested in monitoring's (or any other website's) traffic, visit Alexa (it's free).

Wikinvest Wire