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.”

Comments

Post a Comment

Popular posts from this blog

Gold edges up on weaker dollar, dovish U.S. Fed policy bets

Image
 Gold edged higher on Monday, helped by a weaker dollar and expectations that the U.S. Federal Reserve will reiterate its dovish monetary policy stance this week. Spot gold was up by 0.1% at $1,943.58 per ounce. U.S. gold futures rose 0.1% to $1,950.10 per ounce. “Gold is firm on the basis that the Fed could adopt a further dovish message with respect to average inflation targeting,” said Michael Hewson, chief market analyst at CMC Markets UK. “If you want to have a policy of average inflation targeting, you’re going to have to go into detail as to how you are going to arrive at that particular outcome.” The dollar retreated on Mond ay, bolstering gold’s appeal for investors holding other currencies, ahead of the Fed’s policy decision due on Wednesday. “If inflation forecasts remain at 2% or below, this could offer gold a tailwind as the zero-yielding metal thrives in a low-interest rate environment,” said FXTM analyst Lukman Otunuga. Market participants are also wai...
Read more

For the gold price, two outcomes are possible.

Image
For the gold price, two outcomes are possible. First is a return to or near the April low ($1,277.40). Second is a drop to a lower low, $1,240 - $1,260. Yet a third possible outcome is that the June and December lows were not a double bottom and one further drop may come. I account that the least likely, and look for a low here by the end of the week, but I'm no more'n a nacheral born durnd fool from Tennessee, so what do I know?   You'd think that an institution charged with promoting the gold industry would produce reports that at least cast the best light on gold's prospects. You'd think wrong, if you're thinking about the World Gold Council. They've been negative on gold for, oh, the last 14 years or so. Today they issued a report that contained a nugget about Chinese business using physical gold as collateral for bank credit ($40 bn worth) but they managed to tease a gloomy forecast even out of this inventive monetary use. That and bad ...
Read more

The price of gold advanced as high as $1,603.40 per ounc

Image
The gold price broke out to a new all-time high above $1,600 per ounce Monday morning, rising for the eleventh consecutive trading session. The price of gold advanced as high as $1,603.40 per ounce before backing off to trade just the $1,600 level. The yellow metal gained on the back of a surge in borrowing costs for Italy, the latest European nation to see its bond market come under heavy selling pressure. The lack of a deal to raise the $14.3 trillion debt ceiling also helped boost gold prices. The eleven-day rise in the gold price is the longest winning streak since January of 1980. The gold price delivered another noteworthy performance last week, climbing 3.2% on its way to a series of fresh record highs. With Monday’s advance, the gold price extended its monthly and year-to-date gains to 6.6% and 12.5%, respectively. Last week’s two-day Congressional testimony by Chairman Ben Bernanke on the economy and monetary policy revealed that the Fed remains open to the...
Read more