Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Sentiment and Trend Analysis

Commodities / Gold & Silver 2009 Apr 01, 2009 - 10:24 AM GMT

By: Jordan_Roy_Byrne

Commodities Best Financial Markets Analysis ArticleIn recent writings I have forecasted a consolidation or small correction in Gold. It rebounded $300/oz while most markets sputtered. Yet, at $1,000/oz Gold was overbought and meeting technical resistance while stock indices and commodities were in the process of bottoming. As predicted, the Fed's monetization and “reflation” trade has thus far failed to lift Gold past $1,000/oz. Money is moving into other markets at a time when Gold is relatively extended, but extremely extended in relation to these other markets. Various sentiment data provide us with greater confirmation that the ancient metal of kings is in a period of consolidation.


First let's take a look at Mark Hulbert's sentiment data based on the attitudes of analysts who “time” Gold. The following is excerpted from Hulbert's 3/31 column: http://www.marketwatch.com/news/..

“Consider the Hulbert Gold Newsletter Sentiment Index (HGNSI), which reflects the average recommended gold-market exposure among a subset of short-term gold timing newsletters tracked by the Hulbert Financial Digest. As of March 30, the HGNSI stood at 30.2%. Two weeks ago, in contrast, it stood at minus 16.5%. So, in just ten trading sessions, during which gold bullion on balance went nowhere, the editor of the average short-term gold timing newsletter has increased his average recommended exposure level by nearly 47 percentage points.”

The Fed's announced monetization caused a surge in Gold and prompted a shift in the attitudes of Gold timers. However, the surge in Gold was the result of short covering. Judging from the previous sentiment reading in the HGNSI, the Gold market was overloaded with shorts that were quick to cover on the bullish news. Yet as I explained in my last editorial, news doesn't make trends, it follows them. The news came after a major rebound of $300/oz or roughly 40%. Since the initial reaction Gold has declined but the bullish sentiment hasn't.

Now let's take a look at the public opinion towards Gold. The following chart and data comes from http://www.sentimentrader.com .

The above marks are my annotations. Prior the major breakout in 2005, the peaks in public opinion (% bullish) actually trended down. We have seen a similar trend since the end of 2007. As can be seen in 2005, a breakout in public opinion is not a bad thing. Also, the initial breakout moves in Gold (in 2005 and 2007) peaked (in terms of public opinion) at what looks to be 80% and then 87%. Corrections within the impulsive advances took public opinion down to about 65% and then 70%. Since Gold has yet to breakout, we would look for a bottom in public opinion at 55% to 60%. It is currently 68% bullish. When Gold breaks above $1,000, we'd look for a range in public opinion from 70% to 90% (during the next advance).

Last but not least, let's take a look at the Commitment of Traders Report and how the various traders are currently positioned. The chart is from http://www.softwarenorth.net .

In the current context lower open interest is better. Lower open interest would indicate, among other things less speculative activity and stronger longs. See how high it was in 2008 at the peaks in the Gold price? Notice where it was just weeks after the bottom? We would like to see some reduction in speculator positions as well as reduction in commercial short positions. It is unlikely that the commercial traders will soon end up back where they were last winter (short less than 100K contracts) but a reduction below 150k contracts would be positive. The same goes for open interest.

Overall, current sentiment readings are no cause for alarm but they are a bit too extended for us to believe that a breakout in Gold is imminent. A correction to $850 or continued consolidation between $880 and $1,000/oz for a number of weeks would likely move these gauges to a more bullish position (in contrary terms). Finally we must remember that analyzing sentiment is more an art form than scientific study. Moreover, sentiment actually follows the trend most of the time. It is best used to predict turning points.

By Jordan Roy-Byrne
trendsman@trendsman.com
Editor of Trendsman Newsletter
http://trendsman.com

Trendsman” is an affiliate member of the Market Technicians Association (MTA) and is enrolled in their CMT Program, which certifies professionals in the field of technical analysis. He will be taking the final exam in Spring 07. Trendsman focuses on technical analysis but analyzes fundamentals and investor psychology in tandem with the charts. He credits his success to an immense love of the markets and an insatiable thirst for knowledge and profits.

Jordan Roy-Byrne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in