The Philadelphia Gold Index, $XAU, is usually a better predictor of gold than gold is of $XAU. The top chart shows $XAU relative to gold or the "price relative". Notice that XAU performs best when the price relative rises ($XAU outperforming gold) and the price relative can be used to confirm or not-confirm strength in $XAU.

$XAU advanced from 73.41 to 112.75 (mid July to early Dec) and outperformed gold over this period. While $XAU went to a new reaction high at 113.41, the price relative formed a lower high for a bearish divergence (red arrow). This was a clear sign that $XAU was underperforming gold and led to the double top.

More recently, gold moved to a new high and $XAU failed to follow suit. $XAU managed to find support at 95 and break above 105, but the index remains well below its January high. $XAU is underperforming gold and this should be a concern to gold/XAU bulls.

Chip Anderson
About the author: is the founder and president of He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at, and provides updates about new features or additions to the site. Learn More
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