Gold Sentiment Articles
Some articles that caught my attention.
Gold Breaks 50-Day Moving Average
For the first time in 100 trading days, the price of gold (using the front month futures contract) dropped below its 50-day moving average. This ends the third longest streak of trading above its 50-day that the commodity has had since 2000.
Since we are having talk about the 50-Day Moving Average we must then bring out the Investor Sentiment Cycle phases.
Gold going through which phase?
BUY THE BIG DIP
The public continues to pour money in, lured by glowing good news and economic data. After the long move up, finding attractive stocks becomes difficult for technical traders and market veterans. Traders chase momentum where they find it. Investors believe that the game is back on, and they are willing to take big risk and buy big dips. This Big Dip usually comes after a failed test of top in the Returning Confidence phase. The Big Dip typically takes price below the 50-day simple moving average and quite often, to the 200-day moving average. This is where ABC Corrections are typically found.
———–
DISBELIEF
The market fails to go higher, and indeed many of the early leaders have broken down under the 50-day moving average, giving technicians the Subtle Warning. This marks the beginning of the ‘something is not right’ gut feeling, but in the absence of bad news, investors hold on to hope. Not only are they heavily invested in the market, they are psychologically invested in being right and they ignore anything that does not go with their worldview.
If you believe that gold is going through the Disbelief phase then one would find it interesting that Jim Cramer pounding the table that he is right on gold and Doug Kass is wrong.
One of Kass 2011 surprise’s “The price of gold plummets by more than $250 an ounce in a four-week period in 2011 and is among the worst asset classes of the new year.”
Mark Hulbert of Marketwatch.com came out with a ‘why’ article.
Gold’s mysterious drop; Commentary: No obvious catalyst for gold’s big Tuesday drop
Sometimes, a security’s price will drop for no reason at all — it just happens. It’s beginning to look as though that is what’s the case for gold, which has dropped nearly 3% so far on Tuesday. That’s because the usual suspects have good alibis.
Another Marketwatch article
Gold suffers steepest single-day slide since July
For gold, which advanced 30% in 2010, it was the first “meaningful” selloff in several weeks, said Charles Nedoss, a senior market strategist with Olympus Futures in Chicago.
“We’re seeing [investors] shaking the money tree,” he said. Large-fund liquidation, based on technicals rather than fundamentals, was the story, he added. “The longer-term [upward] trend for gold is still intact. This is just a blip.”
Asset rebalancing may also have played a role in Tuesday’s selloff as funds “fine tune” their weightings during the first half of January, Kitco Metals analyst Jon Nadler wrote in a note to clients.
Large fund liquidation? Hmmm who was bullish on gold in 2010?
FT.com reporting that The Paulson & Co Gold Fund run by John Paulson was up 35% in 2010.
The Paulson & Co Gold Fund, which invests in mining stocks, derivatives and physical gold, is up about 35 per cent.
About a third of all investments in Mr Paulson’s other main funds are also denominated in special gold share classes, which track the performance of the gold market as well as the performance of the underlying funds.
Mr Paulson’s significant personal investments in his funds are almost exclusively denominated in the gold share classes.
Will he be turning his gold paper profits into real cash profits for himself and investors?
Technicians already asking according to Marketwatch.com
Will gold hold?
SPDR Gold Shares (GLD) is down for the third straight day Wednesday morning to trade below its 50-day moving average, which has acted as a floor several times since GLD climbed above this indicator in August.
Ditto for iShares Comex Gold Trust (IAU), which has seen money move in the door since cutting its expense ratio.
A failure to hold at the 50-day moving average could be a sign of a deeper correction in gold and other rallying precious metals. Still, gold has been very resilient in its march higher since the beginning of 2009.
The newsletter of the year for 2010 was awarded to The Aden Forecast which happens to be for mostly gold bugs :)
Letter of the year
Also worth noting Carlos Slim the worlds richest man is looking to enter the silver market in a big way.
FT Alphaville reporting:
Does Carlos Slim really heart silver?
A source in mergers and acquisitions out of Europe has alerted King World News that Carlos Slim may be looking to enter the silver market in a big way. Gold and silver are in big bull markets and this is attracting the attention of some of the smartest money around the globe.
The European source commented, “This deal has been floating around for a while, but I think this time it is going to happen. It’s in his backyard. This is the world’s richest man wanting to get into silver.”
Brad 6:43 PM on January 5, 2011 Permalink | Log in to Reply
Wow- great job with all of that, Pete. That’s a lot to chew on.
I feel like Kass is right, and it will “only” be a $250 slide- not enough to shake me or my clients out.
But I am also feeling sure that you both will be proven right on this in the not-too-distant future.
I wish us all luck!
Pete 8:12 PM on January 5, 2011 Permalink | Log in to Reply
Hey Brad these are just articles people should pay attention to for sentiment reasons. Interesting on CNBC doing the big “Hot Commodities” segment even having Bertha Combs reporting at a goldmine with $1mill worth of gold in front of her. What is next reality shows following gold diggers? Oh wait ;) How many real estate flipping shows were created during the housing boom? lol
Brad 10:44 PM on January 6, 2011 Permalink | Log in to Reply
I have to admit- I know I am supposed to watch CNBC for sentiment checks. And I really want to. But I find it too painful. One of the reasons I love LOVE LOVE T’s site so much is that you guys apparently have the stomach to watch it for me.. THANK YOU. Unghh. SO painful. Bertha Combs. What can I say? I just can’t watch any of them. Thanks-