Methodology

How we calculate the sentiment indices

Overview

The Metal Sentiment Index provides a quantitative measure of market sentiment for precious metals. Each metal index is calculated from exactly 7 components, with each component producing a score between 0 and 100. The final index is the simple average of these component scores.

Index Interpretation

  • 0-24: Extreme Fear
  • 25-49: Fear
  • 50: Neutral
  • 51-75: Greed
  • 76-100: Extreme Greed

The 7 Components

Component A: Price Momentum

Measures how the current price compares to its 125-day moving average.

Metric = (Current Close / 125-day MA) - 1

Scoring: Percentile rank over trailing 3 years × 100. Higher percentile indicates stronger upward momentum (more greed).

Component B: 52-Week Range Position

Shows where the current price sits within its 52-week (252-day) high-low range.

Metric = (Close - Low₂₅₂) / (High₂₅₂ - Low₂₅₂)

Scoring: Metric clamped to [0, 1], then multiplied by 100. A score near 100 means the price is near its 52-week high.

Component C: 20-Day Realized Volatility

Measures recent price volatility using annualized standard deviation of daily returns.

Volatility = σ(daily returns) × √252 × 100

Scoring: 100 - (percentile × 100). This is inverted because higher volatility indicates fear, not greed.

Component D: Volatility / Options Proxy

Uses implied volatility when available (e.g., GVZ for gold), otherwise falls back to 60-day realized volatility.

Preferred: Implied Volatility Index
Fallback: 60-day Realized Volatility

Scoring: Inverted percentile (same as Component C). Higher volatility = lower score = more fear.

Component E: Futures Positioning (COT)

Uses CFTC Commitment of Traders data to measure managed money net positions.

Metric = Managed Money Net Position

Scoring: Percentile over 5 years × 100. More net long positions indicate more greed. Updated weekly, carried forward daily.

Component F: ETF Flows / Holdings

Tracks changes in ETF holdings (GLD for gold, SLV for silver, etc.) as a proxy for investor demand.

Metric = 20-day Net Change in Holdings

Scoring: Percentile × 100. Positive flows (increasing holdings) indicate greed; outflows indicate fear.

Component G: Cross-Asset Risk Proxy

Measures relative performance against a reference asset (typically gold or S&P 500).

Gold: Gold / S&P 500 (20-day momentum)
Silver: Silver / Gold ratio momentum
Copper: Copper / Gold ratio momentum
Platinum & Palladium: Ratio vs Gold or Copper

Scoring: Percentile × 100. Outperformance indicates greed for that specific metal.

Composite Metals Index

The composite index is a weighted average of all five metal indices:

Gold:30%
Silver:20%
Copper:20%
Platinum:15%
Palladium:15%

Statistical Methods

Percentile Calculation

All percentile-based scores use a 3-year rolling window (minimum). This provides enough historical context while remaining responsive to recent market changes.

Winsorization

Raw values are winsorized at the 1st and 99th percentiles to reduce the impact of extreme outliers while preserving the overall distribution.

Score Clamping

All final scores are clamped to the range [0, 100] to ensure consistency and interpretability.

Data Freshness & Error Handling

Daily Updates

Indices are recalculated daily at 6:00 PM New York time, after market close.

Stale Components

If a component cannot be calculated (e.g., missing data), it is marked as "stale" and assigned a neutral score of 50.

Degraded Indices

If 2 or more components are stale, the entire index is marked as "degraded" to alert users that the reading may be less reliable.