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.


  1. It amazes me that a $40 dollar drop in gold - from $1240! - is considered "huge".

  2. 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!

  3. karl says its going the other way and i hope so also so we can start this revaluation.

    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,,,,, ?.

  4. 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."

  5. 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

  6. Iranians now saying Israel is going to occupy Lebanon.

  7. Massive Drain Of COMEX Silver Inventories Continues

  8. Amazing, the stuff is just lowly paving material in Heaven.

  9. Read "Bad Money" by Kevin phillips to see how the CPI is manipulated.

  10. 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?