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.
