Thursday, July 8, 2010

Sentiment Indicators Point North For Gold/Silver

I have borrowed this quote from "JB's" daily bullion market report, which can be found every night at GATA's in the "Midas" report posted under the James Joyce table.  (I am not promoting subscriptions to this, but I don't know how any market professional can participate in the metals market without reading this every night). 

I wanted to highlight this information because the sentiment indicators tracked by Mark Hulbert tend to be particularly accurate for forecasting contrarian market moves in the precious metals.  Per JB: 
MarketVane’s Bullish Consensus for gold lost a point to 63% and the HGNSI slumped 14.3 points to 9.2%. This index has not been this low since August 28th 2009, before gold made its major October-November $200+ move.

The HGNSI is rarely this low, although I believe it went negative in October 2008, before the massive move higher in the metals that included a big dislocation from the equity markets.  Typically readings in the HGNSI below 30 portend a bull move in gold/silver.  Is it perfect?  Who's John Galt?

What I will say is that, based on reader comments, there is an extreme "wall of worry" in the metals investing community.  As I said to a reader the other day:  when you become a perma-bull and everyone I know is bugging me for gold stock tips, that's when we will will start unwinding our positions and start looking for the next game.  I believe that time is many years away and, until then, we will keep adding to our physical gold and silver positions on every pullback.

Standard Bank Confirms Physical Demand

This too is from the JB bullion report:
In a valuable report today, Standard Bank says “With gold below $1,200, the demand response from the physical market has swung from resistance to strong support, as gold selling and scrap sales have dried up. Our Standard Bank physical gold index has bounced into highly positive territory.”
India was also reported to have been a big buyer the last two nights. The Wall Street paper machine has been trying to knock gold/silver lower every day this week.  They are going to have problems with their short positions as physical buyers opportunistically buy on all pullbacks. This is a new phenomenon that I have not seen in the previous 9 years of this bull market. 


  1. Dave-I have to believe that a major turning point is near. Economically, politically etc.

    I see where the DC'ers are talking up how they are pro business etc--

    this is like the "Think" method Professor Harold Hill used to get the parents to hear what they wanted to hear.

    If you say the economy is good people think the economy is good.

    went to a high end restaurant in Chicago last night with a client--the place was packed but towards the end of the evening an entourage of folks came in--turns out it was a US Congressman from Illinois-glad to see they have to conduct business in upper end steak houses while the people (who pay for it)suffer.

  2. What it boils down to, whether Gold goes up or down...I sleep well at night knowing I have it.

    Price watching is for Noobs.

  3. One thing, I am wondering... there are 5 coins made 100 KG each by Canadians and all 5 were sold, the last one in an auction for a scrap price... Two questions:
    1. How come millionnaires didn't bid for that unique coin as it is 99999 purity and only existed in 5!
    2. How come goldcoininvest a german company still markets the coin and it is available (!!!) if all were sold. They still market it and change the price according to days price? Anyone has any ideas? Just curious...

  4. Dave,

    I'd be curious to know to what degree, if any, you apply cycle analysis to your appraisal of the PMs.

  5. None whatsoever. I don't believe in or have any faith in cycles. I believe that were in one big bull "cycle" that will last a long time. That aside, I put total stock in analyzing the fundamentals. The fundamentals for gold/silver are stronger and more prolific now with gold at 4$1200 than when I started into this back in 2001 with gold below $300.

  6. In fact, I saw a great article yesterday or the day before which de-bunked the seasonal views of gold. The analysis went back, if I recall, to 1925. That's a significant number of datapoints.

  7. Is that a linkable story? Summer sure seems to be the place where gold has taken a breather during the current bull cycle.

    Thanks for the replies. :-)

  8. I just looked for it and can't find it. It was in the last couple of days.

    Actually, I just looked at a daily chart back to '06 and this is what I found:

    starting on these dates, gold staged a big rally:

    2009: July 9
    2008: June 10
    2007: gold was flat all summer
    2006: June 15

  9. There have been rallies during the summer, to be sure, but the big trendy moves during that period seemed to come either right after the summer ('07 into '08 and '09) or leading to it ('06, '10). Not exactly a statistically relevant sample, I realize, and even if it were, markets like to go black swan all the time.

    Adam Hamilton laid out a fundamental case for seasonality here, FWIW:

  10. I subscribed to Hamilton for about 2 years back in '03-'04. He's a windbag. Think: Polonius in Hamlet.

    Here's why gold rallies in the Fall: massive Indian buying for their fesitval season and wedding season.

    Summer seasonality is bullshit. Believe it if you want, but it's just another faith-based belief.

  11. And actually, despite ALL of the evidence that proves the GLD is a fraud, Hamilton believes GLD is bona fide. He's got shit for brains. James Turk pointed out GLD's fraud when the original S-4 was filed. Several others, including myself, have expanded on his original work. Anyone who thinks GLD is bona fide, in the face of all the evidence to the contrary, is either an idiot or insane. Which one is Adam?


  13. If the gold producers are being served in this way by the exchanges, I wonder why they don't set up a competing exchange, all physical, all the time. If there is a consistent premium to be had, it would almost seem to be a fiduciary duty.

  14. why do you become upset that GLD is a paper market? It is not a fraud as all commodities are paper markets. When I buy ETF wheat I don't expect a delivery nor 90% of investers do. They simply speculate on future paper price of it and then whoever wants to short it should be able to deliver cash if it goes up, not the actual wheat as it is a cash market, not actual wheat, but rather the pure price of it and it is not a fraud if you have enough cash to settle rather than enough wheat to deliver. The same with gold and silver! Some guys see a major conflict here, but I just can't see how manipulation is bad unless you don't have actual cash (enough) to settle. In the end those who want more cash in future buy ETF GOLD and those who want gold in future just buy the actual gold! Seems to be fair and not a fraud at all. Still not a single person here managed to reply to my earlier post about 100 KG 99999 Coin that was sold for a scrap value plus 0 (zero)% over the spot even though only 5 were made and we have thousands of multimillionnaires and hundreds of billionnaires in USA, China, Middle East etc. All this doesn't square with most of you post here. I am not critisize and don't hate gold or silver, but I don't really hate cash either...

  15. Let's say I decide to create a bank and issue new stock called MyGLD. One stock will be worth 1200 US$ and million of stocks will flow to new owners through stock exchange, which are under impression they are buying gold.

    Since it is backed by nothing and I've no obligation I can take my 1,2 billion US$ and say "Bye, bye, now you already don't need me, you can treat MyGLD yourself within the exchange".

    Doesn't look like fraud to you?

  16. GLD is simply a fractional reserve system (aka musical chairs for real. We just do not know how fractional it is.

  17. How is it any different from any other market though? If you bought skypharma shares some 2 years ago you would by now lose 99% exactly and turn every £1000 you invested into £10 with all those promissed to sell the product treating asthma for £1 bln market... and then ... it didn't work so well. Anything can happen to GLD and SLV, but not unlike any other shares. You could make 100 times the money with QXL when it was revalued to £1 per share and then exploded to £150 per share in 1 year thus turning £6600 into a million and you can easily lose 99% People, unless they are daft in which case they deserve to lose understand that they are not trading gold or anything, but rather they speculate on the future price and NOBODY FORCES them to do that by the way. But we are all speculators as you either put your faith in the bricks and mortar or shares or gold or other commodities or cash or whatever and there is complete freedom to invest in anything and freedom not to take part in anything you distrust. In such a system there is no scope for a not fair game as nothing is secure, without risk or without possible loss or cornering the market. Because yes, if tomorrow unexpectedly 100 mln people would want to buy 10 litres each of milk or orange juice, you would have to say it was also all along a fraud all these years because they would fail to deliver and the price discovery would push prices to the moon just like any other unexpected rise in demand. Today's demand for gold is matched by price. If the demand rises then the price will rise and if it collapses it will collapse, the same with anything else. Again, I repeat if there was any artificial action against gold then those with big money would have known that and would bid for those 100 kg coins enough money to push it well above the scrap price it was sold. A billionnaire would just buy it as a birthday prezie for his granddaughter's best friend...

  18. Why would anyone have bid more for the coin when, as advertised, the coins can still be bought from the producer?

  19. because, according to many, they can produce only very few 999999 100 KG coins and because it would be a valuable opportunity for super rich to get one of very few unique items, ... if they were. If you ask why, then you have to say that the gold is not undervalued and that the price is 100 percent correct, but that is not what writers here seem to imply!!! Doesn't make sense... just curious.


  21. Anonymous,

    It is not the mandate of paper markets to set the price on physical markets. That is not their function.

    Physical markets set the price for physical product.

    Gradually, over decades, as physical declined, LBMA became more geared, some say currently 100 to 1.
    Comex is a paper market.

    For some reason, which I am not aware of, physical market pricing seems to have gone along with the paper market price. Was it Kitco influence, major bullion banks, ..?

    Either way, the CFTC is failing in its mandate and should involve itself in its mandate as per the law.

    The excess, non existant paper metal is distorting the physical market.

    This is true of many commodities, and, given the regulatory capture throughout the system, the system now seems to serve the purposes of finance, rather than the origal intentions when the markets were created.

    Since the paper market IS strongly influencing the physical market (and I can't understand the producers going along with this) your theories of efficient price discovery are flawed.

    Sadly, it would seem that the entire western finance is built around these regulatory failings, and this apparent strength will fail rapidly once these failings are more universally understood.

    About your reply....I am just curious :-)

  22. My theory is not flawed and it's not theory. You need to go over the entire body of work over the last decade and start with

    Have you ever met face-to-face or chatted over the phone with the CEO/COO of mining companies?

    Most of them are pure engineers who are great at what they do - find and produce metal - but neither care nor understand the need to understand what is truly driving the price of gold. All they want to do is maximize production and get the product out of the door. That is fact. I have met with many over the past 9 years. They are great at seeing the trees in the forest but do not see the whole forest.

    There are some who do indeed understand the bigger picture. Those are the ones who support GATA. Rob McEwen - of Goldcorp fame- is another.

    Go do some research and report back.

  23. Dave,

    You've got the wrong Anon.

    I was replying to the anon who has been arguing with you.

    He was saying the price discovery via the paper game was legitimate.

    I was pointing out that the law relating to commodities says that physical markets set prices, and gradualy over the decades, via regulatory capture by finance and their "exemptions", paper that dances to the finance tune now sets physical prices.

    It was never the intent to have this situation, since the founders of the system were aware of the possibility of finance playing games....hence HIS theories of price discovery, (not yours) were wrong.

    I know some producers understand. I know some producers who now hold production back from sales when the market dips.

    What we need is the word to spread faster among the producers...and a bomb up the ass of the gold council might help!


  25. With the exception of the 2008 plunge, in the current bull run since 2000, the same pattern has had gold retreat to its 50-week moving average in the summer months, so that would likely suggest $1100 gold over the coming weeks.

    What about that Dave?