Nov. 30, 2011, 12:01 a.m. EST
Gold likely to be higher at year’s end
Commentary: Sentiment continues to support higher gold prices
By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — Sentiment conditions continue to support higher gold prices.
It was one month ago that I last devoted a column to gold market sentiment, reporting that bullishness had dropped to its lowest level in two-and-a-half years. ( Read my Oct. 26 column, “Why gold is rallying.” )
Though gold did rise $150 an ounce over the subsequent two weeks, bullion today is only modestly higher than then. It’s time to take a fresh look at the sentiment picture.
Consider the average recommended gold market exposure among a subset of the short-term gold market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). This average currently stands at 13.7%, which means that the bulk of timers’ gold-oriented portfolios is being allocated to cash.
To put that in perspective, recall that gold is now trading at more or less the same level it was early last August. Yet the HGNSI then was nowhere near as low as it is today; in fact, it then got as high as 67% — one of its highest level in several years.
In other words, gold timers then were inclined to see gold’s glass as half full, or even three-quarters full. Today, in contrast, even though gold’s glass is in fact just as filled as it was then, gold timers are seeing it as mostly empty.
One way of viewing gold’s sharp correction in the late summer and early fall is that it was necessary to work off that excessive level of bullishness, which stood in the way of gold continuing to rally. Today, in contrast, that bearish slope of hope has given way to a bullish wall of worry.
Additional evidence for this wall of worry comes from the HGNSI’s behavior at gold’s various correction lows over the last year: With each successive low, the HGNSI dropped to an even lower level.
No comments:
Post a Comment