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Mix-Ansicht- MARK HULBERT: Climbing a wall of hope -Gold - Amanito, 19.09.2005, 11:12
MARK HULBERT: Climbing a wall of hope -Gold
-->Climbing a wall of hope
The yellow metal has risen by more than $25 per ounce over the past several weeks, even in the face of relatively bullish sentiment among gold market timers. Gold (38099902: news, chart, profile) is now trading at a 17-year high.
Consider the latest readings from the Hulbert Gold Newsletter Sentiment Index (HGNSI), which measures the average exposure to the gold market among a subset of gold timing newsletters tracked by the Hulbert Financial Digest.
As of Friday's close, the HGNSI stood at 64.3%. This is the same level at which it stood one month ago, and is much higher than its long-term average. Over the last decade, for example, the HGNSI has averaged just over 35%.
The last month's experience notwithstanding, the gold market has tended to find it rough going whenever the HGNSI is as high as it has been in recent weeks. Consider the accompanying table, which shows what happened on each of the prior five occasions in which the HGNSI rose to its current level of 64.3%.
Date HGNSI first hits 64.3% during gold rally Gold one month later Gold two months later Gold three months later
5/21/2003 -2.7% -4.8% -1.2%
12/8/2003 +3.7% -0.5% -1.6%
8/20/2004 -1.5% +3.2% +8.5%
10/27/2004 +5.3% +3.3% -0.9%
3/7/2005 -1.2% -1.8% -2.1%
Average of above five +0.7% -0.1% +0.6%
8/16/2005 +3.2%??
The message of the data in this table is not all bad, of course. Notice that the gold market on average has not plummeted following gold sentiment readings as high as the current one. And bullion's 3.2% rise over the last month is not unprecedented; in two of the five prior cases, in fact, bullion rose just as much or more as it has recently.
Nevertheless, the gold market on average has not produced huge returns following prior instances in which sentiment was this bullish. Over the two months following the five prior instances, for example, bullion on average was more or less flat, and only modestly higher over the subsequent three months.
Let me say a few words in response to those who emailed me the last time I discussed sentiment's impact on the gold market. The essence of your argument was that gold's prospects surely are more a function of factors such as inflation and the dollar than of the opinion of gold timers.
Contrarians do not disagree. But they remind us that it's important to keep separate and distinct those factors that influence the market's longer-term trend from more short-term factors.
Market fundamentals are undoubtedly the primary determinants of the gold market's longer-term trend. Sentiment, to the extent it influences the market's trend, impacts the short term.
The premise of contrarian analysis is that investors tend to overreact. The long-term trend may be up, for example, but if the prevailing mood becomes too bullish, the market will get ahead of itself, at which point a pullback becomes likely.
Just because sentiment among gold timers is now high, therefore, this does not mean gold is not eventually headed much higher. But at least over the short term of the next several weeks, gold would not appear to have the wind of contrarian analysis at its back.
<ul> ~ http://www.marketwatch.com/news/story.asp?guid={B1796A2D-19B4-452E-A0B5-652BE3B6</ul>
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