Gold Price Set to Challenge Record Highs?

While the gold price advanced for the second straight week, sentiment toward the yellow metal has only modestly reflected this rebound. Dennis Gartman, long-time commodities investor and author of The Gartman Letter, wrote on Friday that “there is a decided lack of ‘frenzy’ in the gold market at present, and indeed, we find it passing strange that with gold only a very few dollars from its all time highs there is very little if any speculative enthusiasm.”

Gartman noted that MarketVane’s Bullish Consensus for the gold price dropped 2 points to 77% from 79% over the past several days, well below what he would expect given the fact that the gold price is within a few percent of its all-time high. “Bullish enthusiasm is high,” Gartman acknowledged, “but it is not rising and certainly it is not at ‘nosebleed’ levels consistent with previous interim peaks” in the price of gold.

From a contrarian perspective, the absence of excessive positive sentiment toward the gold price is an encouraging sign. “We remain bullish and it shall be but a matter of time… perhaps even today…” Gartman wrote on Friday morning, “that the recent highs of $1533-1535 in US dollar terms shall be taken out to the upside.” Gartman did not provide a longer-term gold price target, however.

Bill Fleckenstein, another long-time gold price bull and noted market pundit, echoed similar comments to those of Gartman this past week. On Minyanville.com, Fleckenstein contended that a “great set up” has developed for gold stocks. The sector is “sold out,” according to Fleckenstein.

Fleckenstein also pointed to several contrarian indicators that suggest the sector is ripe for a rally. “GDX has low open interest, as do the Rydex gold funds. Futures contracts too have seen a big liquidation. Lots of people are set for gold and the miners to do poorly as QE2 ends, but gold is not just bought by Americans and hence we could see a rally that might catch people by surprise and see gold stocks do quite well.”


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