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I developed the Fear Index in the mid-1980s, and since then it has become my most reliable indicator. I use the Fear Index in two ways.
First, the Fear Index measures gold’s relative value. It does this by comparing gold to what it should be compared against – money. The Fear Index is the percentage of the stock of gold in a country’s central bank divided by the quantity of that country’s currency outstanding. Here is the formula to calculate the Fear Index for the US dollar:
Second, the Fear Index can be used as a measure of gold’s price trend. When fears arise about the safety and stability of a country’s monetary and banking system, the Fear Index rises. When confidence is restored, the Fear Index falls. Though changes in the money supply and gold stock have some impact, these fluctuations are caused mainly by changes in the gold price, and those are driven principally by changes in the demand for gold.
I have been writing about the Fear Index for years, and I hope that you find the following articles to be useful.
July 11, 2010 – The Fear Index has risen to a 16-year high. As of June 30th, the Fear Index is 2.35%, based on M3 data made available by ...
January 20, 2010 – The Fear Index remains within its decade-long bullish uptrend, so we therefore know as a consequence that gold also remains ...
April 13, 2009 - There is no doubt that I have some amazing subscribers. I received a bunch of emails regarding the new Sound Money Indicator (SMI) ...
March 23, 2009 - The other day at lunch with a friend, we began talking about my Fear Index. He suggested that I give it a new name in order to more ...
June 1, 2008 - In the early 1980s I began researching and experimenting to find a reliable and trustworthy guide to evaluate the precious metals. I ...
November 12, 2007 - Everyone knows that the dollar is losing purchasing power day after day because of inflation. Consequently, the practice of ...
October 22, 2007 - On September 18th former Federal Reserve chairman Alan Greenspan appeared on the Jon Stewart Daily Show, where he made the ...
August 7, 2006 - In November 2005 the Federal Reserve announced that it would no longer compile and report M3, which is the total quantity of dollars ...
March 27, 2006 - For more than twenty years the Fear Index has been a reliable and trustworthy guide. I invented it in the mid-1980s in order to show ...
October 3, 2005 - All of the pieces of the puzzle are falling into place neatly and pretty much on schedule. When the puzzle is finished, it will ...
August 1, 2005 - The Fear Index is my most important analytical tool for evaluating gold. It's like a trusty compass that one might take on a hike. ...
January 5, 2004 - Seventy years ago this month the dollar was devalued against gold by 69% when the federal government arbitrarily changed the ...
November 10, 2003 - "Predicting rain doesn't count - building an ark does." So says Warren Buffett.
Long-time readers of these letters know ...
July 7, 2003 - Within the next several months, the price of gold will soar. This past January I projected gold to reach $900 in February 2004. Even ...
January 20, 2003 - One of the most important things to do when managing an investment is to stay aligned with the primary trend. This principle is ...
December 2, 2002 - Gold failed to close above $325 at the end of November. As a result, I am concerned that the Fear Index may begin to break-down ...
November 18, 2002 - Long time readers of these letters know that I am not shy about making my views known. In other words, when it comes to markets, I ...
September 22, 2002 - I was recently given an interesting challenge. An Australian friend of mine named Laurie McGuirk, a hedge fund manager with an ...
June 10, 2002 - The Fear Index has given a buy signal. It is only the fifth buy signal since the US government abandoned the Gold Standard in August ...
March 4, 2002 - The Fear Index is my most trusted model upon which I rely to establish gold's relative value. I report the Fear Index in each letter, ...
February 12, 2001 - Over the years I have presented in these letters several different, but meaningful, ways to measure Gold's relative value. Long ...
Noverm 27, 2000 - Though I have not written about my proprietary Fear Index for awhile, I have not been ignoring this important indicator. I continue ...
September 14, 1998 - The Gold price has rallied sharply over the past two weeks, and may have formed an important bottom. Though it is far too early ...
September 22, 1997 - In recent weeks as the Gold price slid to test support around $320, the bears have come out with newer and lower targets. Some ...
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