I picked up an interesting piece here …
The Commodity Futures Trading Commission’s latest weekly data show that while total outstanding futures contracts in gold have been rising along with the price, the contracts held by speculative traders (essentially reflecting the investment community, rather than buyers and sellers of commercial gold) have been tilting drastically toward bets that prices will continue to rise. Speculative long positions are near record levels, and outnumber short positions by a whopping 9-to-1. It’s evidence that the bull bet has become a grossly overstretched bull bet.
But investor sentiment in the gold market doesn’t look nearly so extreme, said Mark Hulbert, editor of the Hulbert Financial Digest. His Hulbert Gold Newsletter Sentiment Index, which tracks investing recommendations among gold investor newsletters, currently has a reading of 25 per cent - indicative of only modest bullish sentiment on prices.
“The [gold experts] we track are far less enthusiastic now than they were the previous two times we reached this [price] level,” Mr. Hulbert said. “Contrarian analysis suggest we’re much better positioned now to continue higher.”
Meanwhile, over on Marketwatch, Hulbert’s own piece on gold adds a chart that shows sentiment hit 65.4% in March 2008, when gold went to $1,011, 64.3% in July 2008 when gold went to $986, and 56.8% when gold hit $982 in June 2009. So with the Hulbert Gold Newsletter Sentiment Index at just 25.2% this time around, there is PLENTY of room to the upside.
See, the market is really just a big study in psychology. Prices go up until you run out of buyers. By Hulbert’s gauge, there are still plenty of bears who still have to become bulls. And that puts us on track for my target of $1,300 an ounce.
On the other hand, if you think the speculative bets in the futures contracts are more important, then gold is topping out now. I tend to go with the biggest pile of money — all the gold bears who are yet to become bulls. That’s one reason why I think gold is going higher.
Related Posts
- Weekly Gold Chart. Get Your Bull Horns On (11/06/09)
- Gold Outlook — Boil and Trouble (09/10/09)
- Gold Demand Down from a Year Ago, Up from 2nd Quarter (11/19/09)
- 7 Forces Driving Gold Higher in 2010 (12/31/09)
- Why We Closed Gold and Silver Positions Today (12/04/09)
{ 7 comments… read them below or add one }
im afraid im in the “not convinced that this is it” gold bug camp. as you say the market is a big study of pyschology. sure fundamentals mater, but in the short time we look at the charts. im a point a figure man myself, much fewer signals, but does the job. anyway there are more bulls in the headlines than bears now. im waiting for the front cover of one of the newspapers, or my mum to ask me if she should buy some. other thing i was thinking that actually the fed may finally happy to see gold go up, it tells people inflation, not deflation, and so they have saved the world again, (but wasnt it you that slammed rates to zero in the first place, and caused the debt bubble?),
in the end we are all book talkers, your long up to the yings yangs, and i just have my core gold now, and want a sell off to reload.
ps.the chart you link to looks like a chart of the dow, and that was a the double top of all time!
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