Thursday, December 15, 2011

The Sentiment Toward Gold Today

Back in August when gold crossed over $1,900 an ounce, optimism in the gold market had reached a fever pitch.  The daily sentiment index clocked in at 98% gold bullish, a new all time record, as investors across the board were absolutely positive that gold was headed higher.  Here is what I wrote back in August when gold crossed $1,900.

Here is the consensus view of gold today streaming across the financial news wires:
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Gold was a safe haven, a hedge and a speculative trade all at the same time,” said Michael Murphy, CEO of Rosecliff Capital, a hedge fund. “Long gold has been a winning trade for years. We expect the selloff in gold to gain momentum into 2012. Traders are finding better hedges, better safe havens, and better speculative commodity plays than long gold.

CNBC: Gold Sheds "Can't Lose Status": No One Wants It

Gold, in the 11th year of its longest winning streak in at least nine decades, is poised to enter a bear market, according to Dennis Gartman.  He sold the last of his gold yesterday.

Bloomberg: Death Of Gold Bull Market Seen By Gartman

Gold bugs over the last two weeks have become even more discouraged than they were at the end of November. And that’s saying something, since they were already quite dejected. Consider the average recommended gold market exposure among a subset of the shortest-term gold market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). Two weeks ago, when I last wrote in this space about a contrarian analysis of gold sentiment, this average stood at 13.7%. Today it stands at 0.3%, which means that the average gold timer is essentially keeping all of his gold-oriented portfolio out of the market.

MarketWatch: The Gold Bugs Are Throwing In The Towel
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Back in August at $1,900 investors could not get enough gold.  Today at $1,550 they are dumping it from their portfolio and have declared the bull market finished.  What has changed? 

Nothing.

The European Union, Japan, the UK, and the United States are bankrupt.  Their banking system is insolvent.  The entire world's debt to GDP has crossed over 330% and is rising by the hour.  Everything that made gold a strong buy back in August, the fundamentals, continue to improve by the day.  The only difference is that gold is now 20% cheaper.  It has gone on sale.

Now is the time to step in and begin accumulating a position.  Can gold fall further?  Yes.  You should buy more if it does.  We are in the early innings of a global sovereign debt crisis, currency wars, and when the game is over there will only be one currency standing.




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