Sentiment: HGNSI @ +10.9%

Mark Hulbert’s Gold sentiment indicator has fallen from 53% down to 10.9%. He writes:

In other words, the average short-term gold timer we track has reduced his or her recommended gold exposure by 43 percentage points in just two days’ time. That’s among the biggest plunges in gold sentiment I’ve ever seen.

How close are we to a contrarian buy signal for gold?

By way of an answer, I refer you to how low the HGNSI fell at the bottom of all other significant gold market corrections over the last two years.

Month of correction low Lowest level for HGNSI
Apr. 2008 -18%
Aug. 2008 -1%
Nov. 2008 +9%
Mar. 2009 -17%
Jul. 2009 -10%
Average of above five corrections – 7%

As you can see, the HGNSI needs to fall another 18 percentage points to make it down to the level this sentiment index reached on average at the bottom of the five previous significant corrections. Since the HGNSI has fallen an average of 21.5 percentage points in each of the last two days, it could do so very quickly.

This is a positive sign for Gold in the short-term. The HGNSI is just one of several sentiment indicators we track in our Premium Gold/Silver Service.