Followers | 689 |
Posts | 143817 |
Boards Moderated | 35 |
Alias Born | 03/10/2004 |
Friday, May 26, 2017 9:14:39 AM
By Mark Hulbert | May 26, 2017
Optimism as price slumps is a bearish sign
Gold’s sentiment foundation has weakened considerably over the last month.
And that’s saying something, since at the beginning of May it already was quite weak.
But the month of May has witnessed a sentiment development in the gold market that you hardly ever see: even as the price of gold bullion GCM7, +0.72% has fallen, bullishness among gold timers has skyrocketed. This is a bearish development, according to contrarian analysis, since the usual pattern is for bullish sentiment to rise and fall more or less in lockstep with gold itself.
Recent developments therefore suggest that there is a powerful undercurrent of bullish exuberance among gold timers. Historically, contrarians point out, sentiment conditions like this one have not been conducive to significantly higher prices for gold bullion.
Consider what’s happened so far this month: In the wake of a $13 (or 1%) drop in bullion’s price, the average recommended gold market exposure level among short-term gold market timers has jumped by more than 42 percentage points. This reaction is far more reminiscent of the “slope of hope” that bear markets like to descend than of the “wall of worry” that bull markets typically climb.
What has led the gold timers to become so much more bullish in the wake of bullion weakness? There is no one reason, of course. But one argument that several gold bulls have advanced is that, even as gold bullion has dropped, the shares of gold mining companies have risen. In contrast to gold bullion’s 1% month-to-date decline, for example, the PHLX Gold/Silver Index XAU, -0.93% has gained more than 1%. (The XAU is an index of the prices of 29 precious metals companies.)
This is supposedly bullish, these timers argue, since mining company shares’ relative strength historically has been a leading indicator for the price of gold itself.
But, try as I might, I failed to find statistically significant evidence of such a pattern in the historical data. On the contrary, depending on the time periods over which relative strength is measured, gold bullion proceeded to perform better in the wake of XAU weakness rather than strength.
The chart above reflects data back to 1985. It focuses on relative strength calculated over the trailing six months, and shows how gold bullion performed over subsequent periods depending on whether XAU relative strength was high or low. Over the subsequent month, as you can see, there is virtually no difference in returns. And over the subsequent quarter, six months, and one year, gold did better, on average, following XAU relative weakness than strength.
Let me hasten to add that none of the differences plotted in this chart is significant at the 95% confidence level that statisticians often use to determine if a pattern is genuine. I reached the same conclusion regardless of how short or long a period I used for defining relative strength and weakness.
So the takeaway here isn’t that gold bullion investors should now hope for gold-mining company weakness. Instead, the investment implication is that you should look to other indicators for insight into whether gold is likely to go up or down.
Contrarians, of course, believe that sentiment is one such other indicator worthy of attention. And right now, sentiment’s message for the near-term is that gold will continue to struggle.
http://www.marketwatch.com/story/gold-bulls-can-expect-more-bad-luck-2017-05-26
• DiscoverGold
Click on "In reply to", for Authors past commentaries
Information posted to this board is not meant to suggest any specific action, but to point out the technical signs that can help our readers make their own specific decisions. Your Due Dilegence is a must!
• DiscoverGold
Recent GOLD News
- Porgera Mine Working with UN and Enga Provincial Government to Provide Humanitarian Aid to Violence-Stricken Province • GlobeNewswire Inc. • 09/20/2024 03:35:21 PM
- Barrick Continues to Unlock Value Embedded in Its Asset Base • GlobeNewswire Inc. • 09/17/2024 05:00:29 PM
- Feasibility Study on Lumwana Super Pit Expansion Expected by Year-End • GlobeNewswire Inc. • 09/11/2024 09:00:00 PM
- Key Projects Advance as Barrick Keeps Tight Focus on Value Creation and Growth • GlobeNewswire Inc. • 08/12/2024 10:00:00 AM
- Barrick Declares Q2 Dividend and Buys Back Shares • GlobeNewswire Inc. • 08/12/2024 09:59:00 AM
- U.S. Futures Steady as Markets Await Key Inflation Data, Oil Prices Climb • IH Market News • 08/12/2024 09:47:41 AM
- Mining Plays a Vital Role in Advancing the UN’s Sustainable Development Goals, says Barrick • GlobeNewswire Inc. • 08/02/2024 06:45:39 PM
- Porgera Remains On Track Despite Mulitaka Landslide Challenges • GlobeNewswire Inc. • 07/25/2024 11:00:00 AM
- Higher Q2 Production Puts Barrick On Track to Deliver 2024 Targets • GlobeNewswire Inc. • 07/16/2024 11:00:00 AM
- Barrick Continues to Invest in Mali • GlobeNewswire Inc. • 07/09/2024 07:00:00 PM
- Exploration Success, Capital Investment and Reserve Growth to Sustain Kibali’s Production Profile • GlobeNewswire Inc. • 07/02/2024 04:00:00 PM
- Barrick and Zijin Contribute $1 Million to Support Papua New Guinea Landslide Victims • GlobeNewswire Inc. • 06/07/2024 11:18:39 AM
- Form SD - Specialized disclosure report • Edgar (US Regulatory) • 05/29/2024 08:01:04 PM
- Barrick’s Sustainability Strategy Delivers Real Value to Stakeholders • GlobeNewswire Inc. • 05/15/2024 11:00:00 AM
- Barrick Announces Extensive Exploration Partnership with Geophysx Jamaica • GlobeNewswire Inc. • 05/01/2024 10:15:00 AM
- Barrick to Ramp Up Production As It Remains On Track to Achieve 2024 Targets • GlobeNewswire Inc. • 05/01/2024 10:00:00 AM
- Barrick Declares Q1 Dividend • GlobeNewswire Inc. • 05/01/2024 09:59:00 AM
- Barrick Announces Election of Directors • GlobeNewswire Inc. • 04/30/2024 08:15:55 PM
- Barrick On Track to Achieve 2024 Targets • GlobeNewswire Inc. • 04/16/2024 11:00:00 AM
- Notice of Release of Barrick’s First Quarter 2024 Results • GlobeNewswire Inc. • 04/09/2024 11:00:00 AM
- Strategy-Driven Barrick Builds on Value Foundation • GlobeNewswire Inc. • 03/28/2024 09:20:38 PM
- Barrick Hunts New Gold and Copper Prospects in DRC From Kibali Base • GlobeNewswire Inc. • 03/20/2024 02:00:00 PM
- Barrick Opens Academy at Closed Buzwagi Mine • GlobeNewswire Inc. • 03/18/2024 08:00:00 AM
- Barrick to Grow Production and Value on Global Asset Foundation • GlobeNewswire Inc. • 03/15/2024 11:53:01 AM
- Loulo-Gounkoto Delivers Another Value-Creating Performance • GlobeNewswire Inc. • 03/10/2024 10:00:00 AM
VHAI - Vocodia Partners with Leading Political Super PACs to Revolutionize Fundraising Efforts • VHAI • Sep 19, 2024 11:48 AM
Dear Cashmere Group Holding Co. AKA Swifty Global Signs Binding Letter of Intent to be Acquired by Signing Day Sports • DRCR • Sep 19, 2024 10:26 AM
HealthLynked Launches Virtual Urgent Care Through Partnership with Lyric Health. • HLYK • Sep 19, 2024 8:00 AM
Element79 Gold Corp. Appoints Kevin Arias as Advisor to the Board of Directors, Strengthening Strategic Leadership • ELMGF • Sep 18, 2024 10:29 AM
Mawson Finland Limited Further Expands the Known Mineralized Zones at Rajapalot: Palokas step-out drills 7 metres @ 9.1 g/t gold & 706 ppm cobalt • MFL • Sep 17, 2024 9:02 AM
PickleJar Announces Integration With OptCulture to Deliver Holistic Fan Experiences at Venue Point of Sale • PKLE • Sep 17, 2024 8:00 AM