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This is a capitalization weighted index of 15 companies involved in the Gold and Silver mining industry. The XAU was set to an initial value of 100 in January 1979. The bottom section of this chart is the index itself coupled with a 150 day moving average. The middle section is a Relative Strength Comparative between the XAU and the Gold price in US dollars (XAU divided by the Gold price). We use this indicator to help us determine whether Gold shares represent good value relative to the Gold price at any given time. During the present bull market this indicator has tended to bottom in a range from 0.19 to 0.21 (Indicating Gold shares are inexpensive relative to the Gold price) and top out in a range of 0.25 to 0.27 (Indicating Gold shares are expensive relative to the Gold price). The top section of this chart is called a Chaikin's Volatility Index. It is calculated by taking a 100 day moving average of the difference between the highest and lowest levels of the XAU each day. You can see that volatility tends to peak when the market becomes expensive and bottom as we start to see better value prevail. For a more detailed explanation of this concept please read the following article: The Volatility War.
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