Gold sentiment has begun to climb over the past week

The gold price declined Tuesday morning as global financial markets shifted from “risk on” to “risk off.” The price of gold fell $21.80 to $1,722 per ounce, sinking alongside both stocks and commodities. S&P 500 stock futures fell 15.70 to 1265.20 while oil and copper fell 1.5% and 3.2%, respectively. Gold’s sister precious metal fell 2.8% to $34.30 per ounce as measured by front month silver futures on the COMEX.

Gold sentiment has begun to climb over the past week from a “very bearish extreme,” according to Macquarie Equities Research analyst Stephen Harris.

In a note to clients on Monday, Harris higlighted the Ned Davis Research (NDR) Daily Gold Sentiment Composite, which fell to 7.1 on October 14 – its lowest level since at least January 1, 2006 (he did not provide data going back further).

Since that time, the NDR Daily Gold Sentiment Composite has rebounded modestly – to approximately 12 – but remains well in the “pessimistic” zone.

From a contrarian and historical perspective, these readings are “very bullish” for gold prices, according to Harris.

“Near term there is a strong buying opportunity as sentiment towards bullion has reached a bearish extreme, but is starting to rebound,” he added. ”We view this recent price action as being very bullish. Sentiment has retrenched considerably with only a minor consolidation in price. In our view, the pullback from the spike above $1900 to the long trendline has been healthy and prices have begun to strengthen as we move into the seasonal strong year-end period.”