Get off your butt... Time to update that Weathervane Chart of yours on Gold sentiment...!!! It's been a while...
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Mark Hulbert, MarketWatch
Last Update: 12:01 AM ET Mar 17, 2006
ANNANDALE, Va. (MarketWatch) -- At the end of November, I reported that, based on a contrarian analysis of investment newsletter sentiment, gold was a better bet over the ensuing three months than the stock market.
The contrarians were right in this case. Since that column was written, gold bullion has risen 12%, while the Dow Jones Wilshire 5000 index has gained 5%.
Contrarian analysis today reaches the same conclusion as it did three and one-half months ago. Despite gold more than doubling the return of the stock market since early December, editors of gold timing newsletters remain significantly more bearish than do editors of stock timing newsletters.
Since contrarians believe that the markets rarely accommodate the majority, this suggests that there is a stronger sentiment case to be made for gold right now than stocks.
Consider first the Hulbert Stock Newsletter Sentiment Index (HSNSI), which reflects the average equity exposure among a subset of short-term stock market timing newsletters tracked by the Hulbert Financial Digest. As of Thursday's close, the HSNSI stood at 38.1%.
Contrast that with the current reading for the Hulbert Gold Newsletter Sentiment Index (HGNSI), which is based on the average gold market exposure among a subset of gold-timing newsletters. As of Thursday night, the HGNSI stood at minus 19.6%, which means that the average gold timing newsletter is recommending subscribers be net short the market.
In fact, the current HGNSI reading is not that far above its record low reading of minus 31.3%, suggesting that the average gold timer right now is pretty close to being as bearish as he has been in recent years.
This contrast between newsletter sentiment in the stock and gold arenas is very telling. Gold is less than 3% below its multi-decade high set less than two months ago, while the major stock market averages are well below their highs from prior to the 2000-2002 bear market. The S&P 500, for example, is some 15% below its March 2000 high, while the NASDAQ Composite index is more than 50% below its high from that month.
And yet the average gold timer has reacted by running to the exits.
