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 www.kitco.com using Alexa.com 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 kitco.com 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 kitco.com 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 kitco.com traffic spikes from the charts above.
Not a bad indicator in recent times, eh? If you are interested in monitoring kitco.com's (or any other website's) traffic, visit Alexa (it's free).