The precious metals complex is arguably at its most bearish sentiment since the start of the bull market 12 years ago. Either the bull market is over or this will prove to be a tremendous buying opportunity. It’s clear that anyone who doesn’t believe in Gold for the long-term has sold and judging from the sentiment indicators, Gold is now in much stronger hands than when it was trading at these prices at the 2012 and 2011 lows. Despite all of the bearish sentiment, the panic and bad-mouthing, Gold (and Silver) has maintained its consolidation. Thus, if Gold is able to hold this support and turn higher, it should approach $1750 to $1800 faster than one would think. This year will go down in history as one of the best buying opportunities for both the metals and the stocks. Words: 675; Charts: 3
So writes Jordan Roy-Byrne, CMT (http://thedailygold.com) in edited excerpts from his original article* entitled Gold Holding Support Despite Extreme Negative Sentiment.
We all know that sentiment on Gold is quite bearish. Rather than post numerous charts which you’ve likely already seen, I want to note some of the recent statistics. By recent, I refer to the past two weeks.
- Market Vane’s bullish consensus for Gold hit its lowest since 2001.
- SentimenTrader.com’s public opinion, which combines various surveys, touched its lowest level since 2004.
- GLD has seen outflows for 41 consecutive days. It’s monthly outflow was the largest since inception in 2007.
- According to BullionVault and COT data, speculative bets against Gold are the highest since 1999. The recent commercial short position was at its lowest since late 2008.
- We have the majority of sentiment indicators showing more pessimism than in 2008.
- There is an explosion in negative news coverage.
- There’s news that major banks have downgraded their outlooks.
Anecdotally speaking, we see confirmation of sentiment at a major extreme. With this kind of sentiment I’d have thought Gold would be trading at $1450 or $1500. Without knowing anything else, you’d expect Gold to be down considerably, yet it’s only off about 5% year to date and 10% in the past three and a half months. Most important, Gold hasn’t even broken support! . Even Silver hasn’t broken its support.
In addition, Gold is showing a bit more strength when priced against the other currencies. A simple way to chart Gold against the inverse of the US$ is to use the currency ETF UDN. If Gold was in real trouble then we’d see greater weakness against the other currencies. This chart and the preceding chart tell us that we can attribute some of Gold’s weakness to US$ strength.
It’s clear that anyone who doesn’t believe in Gold for the long-term has sold and judging from the sentiment indicators, Gold is now in much stronger hands than when it was trading at these prices at the 2012 and 2011 lows. Thus, if Gold is able to hold this support and turn higher, it should approach $1750 to $1800 faster than one would think.
Gold Mining Stocks
Could the mining stocks be leading Gold lower? It is possible but the HUI has bounced from major support at 337 which we identified several weeks ago….
The precious metals complex is arguably at its most bearish sentiment since the start of the bull market 12 years ago. Either the bull market is over or this will prove to be a tremendous buying opportunity. At the same time, Gold hasn’t even broken support or made a new 52-week low. It shows you the amazing strength of this bull market. Despite all of the bearish sentiment, the panic and bad-mouthing, Gold (and Silver) has maintained its consolidation.
This year will go down in history as one of the best buying opportunities for both the metals and the stocks.
Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://thedailygold.com/gold-holding-support-despite-extreme-negative-sentiment/ (Copyright © 2013 The Daily Gold; Roy[Byrne offers a Free Newsletter and TheDailyGold Premium, a publication which emphasizes market timing and stock selection for the sophisticated investor.)
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