How to read BASED Gold Report

The BASED Gold Report is a data-based risk management tool developed by BASED for the gold market. Delivered to subscribers weekly, the report includes proprietary trend signals, probability-based buy/sell zones, and key data points to monitor. This article dives into the report's components and the rationale behind their inclusion.

BASED Trend Signals

The BASED Trend Signals are designed to help you position yourself—long, short, or neutral—in the market to capitalize on prevailing trends. These signals are derived from a multifactor model where price and volatility are key components.

The signals are provided in three durations: long (multiple years), intermediate (up to a year), and short-term (up to a month). They are optimized to avoid drawdowns and generate alpha against the underlying asset. When used together with the buy/sell zones, you can significantly enhance your chances of making timely and profitable trades.

Our signals incorporate volatility protection measures, often overlooked by market participants. These measures are designed to sideline you ahead of major price declines. Notable instances where this protection was effective include February 15, 2013, March 4, 2020, July 29, 2020, and March 8, 2022. Reviewing these dates highlights the importance of timely market exits.

Proprietary Buy/Sell Zones

The report's Buy/Sell Zones are price ranges where it's advantageous to buy or sell in the coming week. Based on statistical analysis and probabilities, these Zones work best when aligned with the BASED Trend Signals, ensuring you trade with the trend, not against it. Timing your trades within these Zones provides you a data-based edge by aligning probabilities with your trades and helping you maximize your profit margin.

Daily and weekly charts

The report features daily and weekly charts, offering instant updates on price movements. Daily charts provide insight into recent price actions, while weekly charts offer a longer-term perspective. The charts also include volatility, volume, and market positioning subcharts to help see what's happening within the trend. You'll observe that price trends often emerge in short-term charts before appearing in longer-term charts as momentum builds.

Key levels

Key levels indicate potential price reversal levels, acting as support and resistance to price. In the gold market especially, these levels are often tested or breached before a price trend changes, so being aware of these levels helps you make better decisions when price is at these levels.

Past and upcoming key events

Events like central bank interest rate decisions and economic data releases (inflation, GDP, employment numbers etc.) can have significant impact on prices. Therefore it is important to be aware of these events. This is why the report includes a table of key past and upcoming events, which can act as potential catalysts for price reversals. As options trading increasingly affects the capital flows in the markets, options expiration dates are also included in the key events.

Volatility and volume

Volatility and volume are integral to the BASED process. The report includes data and trends on volatility and trade volume, along with an Implied Volatility (IV) premium and discount table. This table helps you understand whether options traders expect future market volatility to be higher or lower than historical volatility, acting as a useful sentiment gauge. High IV premiums developing from past IV discounts can be indicative of extensive hedging and fear in the market, while IV discounts developing from premiums indicate market complacency.

Market positioning

The report includes market positioning data based on the Commitment of Traders (CoT) reports, showing how the market is reacting to recent price actions. Especially the trends and extreme positioning (measured by the Z-score) in managed money CoT numbers often indicate market sentiment, with investors typically bearish at bottoms and bullish at tops.

Market sentiment

The BASED Sentiment Index is Our proprietary market sentiment metrics, derived from options prices, open interest, fund flows, and CoT reports, helps gauge the market's view on gold. This sentiment index oscillates between 100 (extreme optimism) and 0 (extreme pessimism) and acts as an indicator, telling you what the consensus is doing in the market.

Professional remarks

This section features insights from BASED co-founder and CEO Sam Laakso, who developed the report. Here, Sam highlights meaningful changes in the data, offers data-based insights, and shares his latest market observations.

For more on the ethos of the BASED Gold Report, read our article Introducing the BASED Gold Report, or subscribe to receive the latest data today.