It has been some time since we last looked at what Google Trends can tell us about the future price of gold.
Google Trends allows us to see volume trends for specific search items related to gold. In the past, extreme spikes in search volume have correlated closely with major turning points in the gold market. What is the predictive power of Google Trends telling us about gold today?
When we looked at Google Trends in March 2009, we examined search engine results for Sell Gold and Buy Gold (see What Can Google Trends Tell Us About Gold?). It was observed that as gold was hitting its peak in March 2008, there was a spike in search volume for Sell Gold. After the brutal sell off that correlated with the substantial decline in all asset categories due to the financial meltdown during 2008, there was a spike in Buy Gold search inquiries that correlated closely to the gold bottom in late 2008.
What is Google Trends telling us today, after gold's increase of $183 per ounce since the beginning of the year?
As we can see from the chart below, a huge spike in search queries for Sell Gold corresponded closely to the all time high in the price of gold at $1,895 reached in September 2011. The current lack of search volume queries for Sell Gold as well as the decline in news reference volume (despite gold's large price increase since the beginning of the year) is a clear bullish signal for gold.
Another indicator suggesting that the general public is totally apathetic on gold is seen by viewing the Google Trends results for Gold Investment. Last year, search queries for Gold Investment spiked as gold was reaching its September highs. Despite the huge gold rally of 2012, low news volume and search queries for Gold Investment indicate very low interest in gold and constitute a contrary bullish indicator.
Finally, a look at the volume of search queries for Gold also indicates that the current gold rally has a long ways to go. Even as the price of gold has increased non stop since January, the volume of search queries and news references has plunged.
The very low search inquiries for gold as shown in Google Trends is a strong contrary bullish indicator. The risk of buying gold right now seems exceptionally low and the rewards exceptionally high.
Last year, Google Trends search inquiries on gold did not flash a sell signal until after gold had spiked by 26%. If the same ratio applies going forward, Google Gold Trends won't flash a sell signal until gold prices reach the $2,250 range.