Mark Hulbert: Gold Traders Strangely Subdued

Mark Hulbert’s HGNSI (a sentiment indicator) was 74% at the recent all-time high. Now it is only 20%. Gold has remained firm as most assets- including gold and silver shares, have declined.

Consider the average recommended gold exposure among a subset of the shortest-term gold timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). This average currently stands at just 20.3%, which means that the average gold timer is currently allocating nearly 80% of his or her gold portfolio to cash.

To put the HGNSI’s current level into context, consider that it is just 13 percentage points higher than the 7% level at which this average stood at gold’s mid-May low. Normally in the face of a $65 increase in gold’s price, we’d expect to see the HGNSI jump by more than this, which is why contrarians conclude that bullishness in the gold market remains healthily subdued.

In fact, even though gold closed Monday within 10 dollars of its previous all-time high, the HGNSI currently stands 53 percentage points below where it stood when gold hit that earlier high.

This all suggests to contrarians that gold has good odds of soon trading at a new all-time high. How far bullion is able to push into new-high territory will depend in no small part by how quickly the gold traders then choose to jump on the bullish bandwagon.

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