Gold Projection DivergenceGOLD PROJECTION DIVERGENCE
Oscillator Companion for the Gold Macro Projection Model
OVERVIEW
The Gold Projection Divergence oscillator quantifies how far gold is trading from its projected fair value. While the main indicator shows where gold should be, this oscillator shows how extreme the mispricing is—providing precise timing signals for entries and exits.
HOW IT WORKS
The oscillator calculates the difference between actual gold price and the projected value, then normalizes it as a Z-score . This statistical measure shows how many standard deviations gold is trading away from its projected fair value.
Z > +2 — Gold is 2+ standard deviations above fair value (extremely overvalued)
Z > +1 — Gold is moderately overvalued
Z = 0 — Gold is trading at projected fair value
Z < -1 — Gold is moderately undervalued
Z < -2 — Gold is 2+ standard deviations below fair value (extremely undervalued)
VISUAL ELEMENTS
Histogram — Color-coded divergence magnitude
Yellow Line — Smoothed Z-score
Dashed Lines — +2 and -2 standard deviation levels
Dotted Lines — +1 and -1 standard deviation levels
Triangle Markers — Extreme crossover signals
Circle Markers — Zero-line crossings
HISTOGRAM COLORS
Dark Red — Z > +2 (extreme overvaluation)
Orange — Z between +1 and +2
Light Orange — Z between 0 and +1
Light Green — Z between -1 and 0
Green — Z between -2 and -1
Lime — Z < -2 (extreme undervaluation)
COMPONENT TABLE
The breakdown table shows divergence from each individual factor:
Silver — Is gold over/undervalued relative to silver?
M2 — Is gold over/undervalued relative to money supply?
DXY — Is gold over/undervalued relative to dollar strength?
Equity — Is gold over/undervalued relative to stocks?
TIPS — Is gold over/undervalued relative to real rates?
TRADING APPLICATIONS
Mean Reversion Strategy
Enter LONG when Z < -2 and begins rising
Enter SHORT when Z > +2 and begins falling
Use zero-line crossings for trend confirmation
Trend Following Filter
Only take long trades when Z < 0 (undervalued)
Only take short trades when Z > 0 (overvalued)
Divergence Confirmation
Bearish: Price makes new highs while Z-score makes lower highs
Bullish: Price makes new lows while Z-score makes higher lows
ALERTS
Extreme Undervaluation — Z crosses below -2
Extreme Overvaluation — Z crosses above +2
Moderate Undervaluation — Z crosses below -1
Moderate Overvaluation — Z crosses above +1
Divergence Turned Positive — Crossed above zero
Divergence Turned Negative — Crossed below zero
COMBINED USAGE
For best results, use both indicators together :
Main Indicator — Visual context of actual vs. projected on price chart
Divergence Oscillator — Precise measurement for timing decisions
The main indicator shows where gold should be; the oscillator shows how extreme the mispricing is and when to act.
Disclaimer: This indicator is for educational purposes only. Past correlations do not guarantee future relationships. Market conditions can alter historical relationships. Always use proper risk management.
Penunjuk Pine Script®
