The Golden Truth: Sentiment Indicator Points To A Sharp Rally Coming In Gold

Sunday, July 4, 2010

Sentiment Indicator Points To A Sharp Rally Coming In Gold

By one historically accurate contrary sentiment metric, the gold market is poised to stage a surprising move higher soon. From the Hulbert Gold Sentiment Newsletter Index:

over the three decades I've been tracking investment newsletters, the gold market has -- on average -- adhered to the contrarian pattern. That is, bullion has turned in far higher returns in the wake of low HGNSI levels than in the days and weeks following high readings.

Here's a link the full article: Sentiment Pointing To Higher Gold Prices

If memory serves me correctly, I believe the HGNSI bottomed around the 18 level in October 2008 vs its current 23.5 reading. Both sentiment readings point to extreme pessimism/bearishness, which typically forecasts a big move higher coming.

Back then gold disconnected from its correlation with the stock market and began a move from $700 to its current $1211 level, or 73%. The fundamentals supporting the price of gold have only strengthened considerably since Oct 2008, including a global movement of gold investors seeking to take actual physical delivery.

One other point, the import premiums for India and Viet Nam on Friday snapped back sharply to unusually high levels, indicating that the $40 price drop stimulated widespread, aggressive buying in those two countries, the 2nd and 5th largest gold buying nations.

The market is telling us one thing for sure: Americans may be clueless with regard to gold, but the rest of the world has become used to $1200 gold and will welcome any downside price manipulation by U.S. banks with widespread arms.

10 comments:

Dave NarbySunday, 04 July, 2010
It amazes me that a $40 dollar drop in gold - from $1240! - is considered "huge".
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AnonymousSunday, 04 July, 2010
It's refreshing to hear the voice of reason informed by decades of sound, methodical, empirical analysis providing us with the simple clarity of the obvious, a view otherwise altogether lost in the welter of obfuscations and outright falsifications designed to run the weak hands out of their positions. For my part, I simply cycled over to Dave's Gold and Silver and fortified my holdings all the while indulging in a friendly and enjoyable banter with my buddies over as usual. No worries. And as usual thanks for the flow from the Golden Truth. Have a great Fourth!
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MikeSunday, 04 July, 2010
karl says its going the other way and i hope so also so we can start this revaluation.
http://market-ticker.denninger.net/archives/2472-July-4th-Market-Musings-Half-Year-Checkup.html

i personally agree with fofoa that the TA on gold is a waste of time, players in the gold market whether they are long or short will get nothing in the end and the price will go to zero.
so why care about the commodity of what gold is trading at except when you are ready to buy it, forget the paper games.

FOA: In the event of a large enough default, the entire world of paper gold trading will be forced into full cash settlement. The question will be presented: "if there isn't enough gold around to settle these commitments, then there isn't any point in letting the price rise further to effect still no metal settlement",,,,,,, "This was a contract trading market anyway, not a gold market"! Further, the international banking industry, in accords with their governments, will enforce a kind of "position limit" on the amount of gold liability they or their customers can carry. Both long and short. It will have nothing to do with the exchanges, rather it will be a bookkeeping problem being addressed by the banks. Still, it will impact the illusion price we use for gold,,,, downward. The net effect of this will be just the opposite of what paper gold players expect as positions are "force liquidated" prior to even a "cash settlement". This sudden dumping of major contract commitments onto the markets will drive the cash settlement price of gold,,,,, ?.
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AnonymousMonday, 05 July, 2010
Interesting comment from this site about Vietnam's estimated 36 tonne gold export for last 6 months.

"A gold expert observed that Vietnam’s gold export products are now mostly raw jewelry products and that Europe remains the main export market. 'The countries purchase Vietnam’s jewelry products to make bar gold. Meanwhile, Asian countries do not import Vietnam’s jewelry products,' the expert determined."

http://vietnambusiness.asia/36-tons-of-gold-exported-in-first-six-months/
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AnonymousMonday, 05 July, 2010
What do you know will happen if they announce another massive round of 'quantitative easing?' What do you think will happen if they secretly print up a bunch more bucks and us 'little people' find out about it later? The same thing-a flight out of the dollar, likely into glod/sliver. I doubt that the printing presses will get dusty with disuse anytime soon! Meanwhile, those premiums for coins are certainly going to go up even more.
Thanks for keeping a knowledgeable eye on these things, Dave! Just watching the prices for Au and Ag falling this morning is causing my 'money' to burn a hole in my pocket. Redneckistanian
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AnonymousMonday, 05 July, 2010
Iranians now saying Israel is going to occupy Lebanon.

http://www.presstv.ir/detail.aspx?id=133508&sectionid=351020202
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HopiumMonday, 05 July, 2010
Massive Drain Of COMEX Silver Inventories Continues

http://news.coinupdate.com/massive-drain-of-comex-silver-inventories-continues-0344/
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AnonymousTuesday, 06 July, 2010
Amazing, the stuff is just lowly paving material in Heaven.
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AnonymousTuesday, 06 July, 2010
Read "Bad Money" by Kevin phillips to see how the CPI is manipulated.
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anish poojaraThursday, 08 July, 2010
Why did Gold fall from $1,265 to $1,190 when the conditions were right for a further rise?
Manipulation by the big Banks?
All US states were supposed to have been broke by now. What happened?
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Add comment

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.