Method

How to read a metals chart

Three settings decide what a price chart appears to say, and all three are usually chosen for you by whoever published it. Learning to check them is most of the skill.

1. Timeframe

The same series can look like a collapse, a consolidation or a relentless uptrend depending only on where the window starts. This is not dishonesty; it is arithmetic. The defence is simple: look at more than one window before forming a view, and be suspicious of any chart whose start date sits suspiciously close to a peak or a trough.

2. Base currency

A metal price is a ratio between the metal and a currency, and either side can move. Gold quoted in a currency that has weakened against the dollar will show a stronger uptrend than the same gold quoted in dollars — the metal did one thing, the money did another. Always know which currency you are looking through, and re-base to your own when the question is about your own purchasing power.

3. Linear or logarithmic

On a linear axis, equal vertical distances represent equal dollar moves. On a logarithmic axis, they represent equal percentage moves. Over fifteen years of a volatile asset, a linear axis exaggerates recent moves and squashes early ones into an unreadable line; a log axis shows proportional change consistently. For long histories, log is usually the more honest picture.

Two more habits worth having

• Nominal versus real. A nominal all-time high is not the same as a real one. Prices from decades ago need adjusting for inflation before the comparison means anything.
• Ratios over levels. When you want to strip out currency effects entirely, look at metal-to-metal ratios. They cannot be flattered by a weak currency.

Educational content only. Not investment advice.