Anecdotal Sentiment

This is not going to be a complete update of gold sentiment data, we just want to look at recent press reports on gold and show how they correlate with trader positions and opinions.

Yesterday we happened to look at the market news headlines posted at the start page of Yahoo Financial. These were the top headlines:

 

Gold loses luster as retail investors look to silver

Here’s why gold could be headed to $800: Insana

 

A few quotes from the second article:

 

“…in the absence of a full-scale geopolitical crisis, economic collapse, or other “black swan” event, there is no good reason to hold gold — at least here in the U.S.”

 

Of course, it is in the nature of “black swan” events that they are unforeseeable, or at least unforeseen by the majority. Their current “absence” is a meaningless datum with respect to the future.

 

“….even a cursory look at inflation indicators, be they the level of global interest rates, inflation expectations as measured by TIPS (Treasury Inflation Protected Securities) and the direction of inflation, itself, do not suggest that gold, in dollar terms, can, or will, go meaningfully higher in the days ahead.”

 

A “cursory look at inflation indicators” would not have revealed any major increase in inflation expectations in any of the 10 years during which gold rallied from $250 to $1,900 either. Obviously, there are other drivers that are just as, if not more important, for the gold price.

 

“….the longer-term view remains bleak.”

 

Only if one subscribes to the notion that six years (and ongoing) of unbridled central bank activism will have no negative consequences. Even though that flies in the face of sound economic theory and all experience, it is admittedly the consensus right now. When the peak of the last central bank-induced bubble came into view, consensus opinion was very similar. Even once the crisis arrived, gold bears were fond of saying: “If gold cannot rise now, it never will” (i.e., the “longer term view was bleak”).

Next comes the pièce de résistance though:

 

“If you’re still looking for a safe-haven investment, a better option would be large-cap stocks with lots of cash and good management.”

 

We have heard a lot of things said about stocks in the course of the current bubble era, but this is the very first time we are coming across someone referring to them as a “safe haven”.

On Marketwatch we found this yesterday:

Oil, other commodities will be in the dumps for another decade (gold is one of those “other commodities” the article focuses on. The author informs us at the end of the report that he is throwing the towel and selling all his positions in these sectors. He incidentally also seems to think he knows more about the markets than Jim Rogers. Rogers is not always right about everything, but we have our doubts about that).

On November 6, the AP reported the following: Gleam is gone as gold prices sink to 4-year low. This article is especially interesting, as it informs us about the utter hopelessness of the situation (which is very similar to the NYT article from 1976 we recently quoted):

 

“Nothing is going gold’s way. Inflation remains tame, the dollar looks strong and Americans are increasingly confident. Even fears that the Federal Reserve would set off another financial crisis have faded as the central bank ends its effort to pump money into the economy. In short, all of the reasons for buying gold over recent years have disappeared, helping to drive prices for the metal to a four-year low.

[…]

Among investment strategists, there’s a growing belief that the worst for gold has yet to come. A surprise announcement by the Bank of Japan last Friday that it will expand its efforts to revive that country’s growth sent traders out of Japanese yen and into U.S. dollars. Gold plunged in response. In the U.S., the Fed’s next big step is an interest-rate increase, expected sometime next year. That should make savings accounts, money-market funds and other short-term investments more appealing. A higher benchmark rate would also sap inflation pressures and give the dollar another lift. Current trends, in other words, are all blowing against the yellow metal.

[…]

“Perhaps that’s the best thing you can say about gold,” says Edward Meir, a senior commodity consultant at INTL FCStone in New York. “Everybody is bearish on it. Honestly, though, I can’t see any bullish story at all.”

 

(emphasis added)

We distinctly remember that back in 2000, “everybody was bearish on it” too. And they sure couldn’t “see any bullish story at all” at the time, otherwise they would undoubtedly have told us about it. :)

 

A Few Data Points

It is interesting how the recent wave of bearish pronouncements in the press correlates with positioning and survey data. We want to pick out just two, which (similar to the AP article quoted above) were recently pointed out by Steve Hochberg of EWI.

 

Gold, small specsPositioning of small speculators in gold futures: from an 11 year high in the net long position at gold’s secondary peak in 2012 to a 15 year record net short position today – click to enlarge.

 

Even more interesting is a data point we haven’t discussed in some time, namely the Daily Sentiment Index. The chart below depicts a 5-day average of this index (which is a survey of futures traders conducted by tradefutures.com). It has just reached a record low of only 5% bulls. This compares to a record high of 96% bulls at the 2011 peak.

 

Gold-DSIA record low in the 5-day average of the daily sentiment index on gold – click to enlarge.

 

Interestingly, GOFO rates have recently dipped into negative territory several times as well. While this is not as significant as it would otherwise be while short term interest rates are pegged near zero by major central banks, it still signifies that there is growing tightness in the physical gold market.

 

Conclusion:

One must be careful with sentiment data during a clear trend, as they simply tend to follow prices to a large extent. They can serve as an additional input, but cannot really be used for precise timing. And yet, once people start saying that there simply is no reason at all to be bullish, and the bullish consensus according to positioning and sentiment data plumbs all time lows or multi-year lows, we have what is essentially a textbook contrarian situation on our hands.

This does not necessarily mean that there won’t be any further price declines (as noted previously, from a technical perspective further short term downside in gold can certainly not be ruled out), but it is undoubtedly a heads-up that the trend may be close to reversing. In this particular case one must also consider that central banks have blown yet another bubble of truly gargantuan proportions. As Mr. Singer of Elliott Management recently noted in his Q3 letter to investors:

 

“Nobody knows when reality will overtake the rhetoric, lies, phony statistics, wishful thinking, fake prices and tiresome poseurs pretending to be world leaders. The situation is universal, a consequence of terrible leaders and careless (or clueless) citizenry. Global problems are continuing to mount, along with the risk that the consequences of years of bad policies and inept leadership coalesce (as sometimes happens) in a short window of time.”

[…]

“Economics also provides its share of delusions, including the debt-fueled bubbles of both the 1920s stock market and the first dotcom boom. The real estate boom of the 2000s was another one, as excess demand was fueled by the combination of near-free money, the most marginal financial products ever invented, and the frenetic selling of houses to people who could not afford them and did not actually own them in any meaningful sense of the word.

“These examples are easy, because they were mass beliefs that were unreasonable in the extreme at the time they were held. Of course, at the time not everyone held the same deluded views, but the disbelievers were (and always are) discredited, demoralized and ignored while the delusions were alive. The problem is that while the delusions remain intact there is no proof available to convince the believers of their folly. Simply repeating that a mass belief is crazy does not make it so (nor convince anyone else that it is nuts). Furthermore, the amount of time necessary to reveal the truth is sometimes too long for nonbelievers to bear, so they just stop trying.

“There is a current set of delusions that is powerful and dangerous: that monetary debasement can be infinitely pursued without consequences; that the financial system is now solid and sound; that the low volatility and high prices of stocks, high-end real estate and bonds are real; that bonds are a safe haven; and that large financial institutions which get into trouble in the future can be unwound in a much safer way than they could be in 2008.

We have discussed each of these elements in the pages of this report and previous ones in an attempt to reveal the fallacy and unsustainability of such beliefs. But, as stated above, they will only enter the history books as mass delusions if they are unmasked in the future as unjustifiable and erroneous beliefs at the time they were held. We think that test will be met, perhaps soon.”

 

To the list of delusions Mr. Singer enumerates we can now add yet another one, provided by Ron Insana (nomen est omen?): “Big cap stocks are now considered a save haven too”.

It is of course very hard to stay the course when the markets do their best to convince everyone that things are perfectly fine and that, in the case of gold, no-one needs any insurance against the potential consequences of current policies anymore. As Mr. Singer points out: “While the delusions remain intact there is no proof available to convince the believers of their folly”.

However, one must not lose sight of the fact that they won’t stay intact. Once that juncture arrives, a few people will probably remember that they once read somewhere that the bullish consensus on gold had at one point declined to a mere 5%. :)

 

Charts by: Sentimentrader, EWI

 

 
 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

6 Responses to “Gold Sentiment – A Contrarian’s Dream?”

  • ManAboutDallas:

    Insana is and has always been one of the CrimNakes’ favourite “go-to” SockPuppets when they want to spoon-feed the Schmoos some more swill. If they’re trotting him out now with this piece of risible nonsense the bottom is in, or near.

  • Please fix the spelling in the title–that’s the only flaw in this otherwise brilliant analysis.

  • This is a meticulously researched and extremely well written article. Thank you, father of darkness!

  • I wonder how much of this paper is going to hold up? If history holds course, most of it will be used to paper the walls of those that are stuck with it, except they never give you an actual bond or stock certificate any more. A stronger reason for the decline in gold, silver, copper and oil is the fact that someone needs money and these are liquid. Thus, they are holding their current winners and selling their losers, quite likely. People with a long term perspective rarely ever sell except to raise cash to retire margin calls. I am currently long silver. It doesn’t look too good right now, down 34 cents at present for the night.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • India: The Lunatics Have Taken Over the Asylum
      Goods and Services Tax, and Gold (Part XV) Below is a scene from anti-GST protests by traders in the Indian city of Surat. On 1st  July 2017, India changed the way it imposes indirect taxes. As a result, there has been massive chaos around the country. Many businesses are closed for they don’t know what taxes apply to them, or how to do the paperwork. Factories are shut, and businesses are protesting.   A massive anti-GST protest in Surat  [PT]   Increases...
  • Adventures in Quantitative Tightening
      Flowing Toward the Great Depression All remaining doubts concerning the place the U.S. economy and its tangled web of international credits and debts is headed were clarified this week. On Monday, Mark Yusko, CIO of Morgan Creek Capital Management, told CNBC that:   “…we’re flowing toward the path of 1928-29 when Hoover was president. Now Trump is president. Both were presidents with no experience who come in with a Congress that is all Republican, lots of big promises,...
  • The Student Loan Bubble and Economic Collapse
      The Looming Last Gasp of Indoctrination? The inevitable collapse of the student loan “market” and with it the take-down of many higher educational institutions will be one of the happiest and much needed events to look forward to in the coming months/years.  Whether the student loan bubble bursts on its own or implodes due to a general economic collapse, does not matter as long as higher education is dealt a death blow and can no longer be a conduit of socialist and egalitarian...
  • How Dumb Is the Fed?
      Bent and Distorted POITOU, FRANCE – This morning, we are wondering: How dumb is the Fed? The question was prompted by this comment by former Fed insider Chris Whalen at The Institutional Risk Analyst blog.   They're not the best map readers, that much is known for certain. [PT]   [O]ur message to the folks in Jackson Hole this week [at the annual central banker meeting there] is that the end of the Fed’s reckless experiment in social engineering via QE and...
  • Tales from the FOMC Underground
      A Great Big Dud Many of today’s economic troubles are due to a fantastic guess.  That the wealth effect of inflated asset prices would stimulate demand in the economy. The premise, as we understand it, was that as stock portfolios bubbled up investors would feel better about their lot in life.  Some of them would feel so doggone good they’d go out and buy 72-inch flat screen televisions and brand-new electric cars with computerized dashboards on credit.   The Wilshire...
  • Which Is Worse? America or France?
      French Fraud POITOU, FRANCE – “Which is worse? America or France?” The question must be put in context. We were invited to dinner with local farmers last night. Jean-Yves and Arlette live in a modest house in the nearby town – an efficient and cozy place built about 25 years ago. They’ve added a solarium to the back, where we had dinner.   FAF – French-American Friendship. These days it's a “which is worse” competition... [PT]   Arlette operates a...
  • The Myth of India's Information Technology Industry
      A Shift in Perception – Indians in Silicon Valley When I was studying in the UK in early 90s, I was often asked about cows, elephants and snake-charmers on the roads in India.  A shift in public perception— not in the associated reality — was however starting to happen. India would soon become known for its vibrant IT industry.   Friends and family are helping students taking university exams with cheating. 2.5 million candidates, many of them with PhDs or post-graduates,...
  • No “Trump Bump” for the Economy
      Crackpot Schemes POITOU, FRANCE – “Nothing really changes.” Sitting next to us at breakfast, a companion was reading an article written by the No. 2 man in France, Édouard Philippe, in Le Monde. The headline promised to tell us how the country was going to “deblock” itself.  But upon inspection, the proposals were the same old claptrap about favoring “green” energy... changing the tax code to reward one group and punish another...  and spending more money on various...
  • Putting the Latest Silver Crash Under a Lens
      An Unenthusiastic Market On Thursday, July 6, in the late afternoon (as reckoned in Arizona), the price of silver crashed. The move was very brief, but very intense. The price hit a low under $14.40 before recovering to around $15.80 which is about 20 cents lower than where it started.   1 kilogram cast silver bars from an Austrian refinery. These are available in 250 g, 500 g and 1 kg sizes and look really neat. We use the 250 g ones as paperweights, so this is an...
  • Gold and Silver Capitulation – Precious Metals Supply & Demand Report
      Last Week in Precious Metals: Peak Hype, Stocks vs. Flows and Capitulation The big news this week was the flash crash in silver late on 6 July.  We will shortly publish a separate forensic analysis of this, as there is a lot to see and say.   Silver - 1,000 troy ounce good delivery bars, approved by the COMEX. Whatever you do, do not let one of these things land your feet. For readers used to the metric system: these bars weigh approximately between 28 to 33 kilograms...
  • The Dangerous Season Begins Now
      Old Truism Readers are surely aware of the saying “sell in May and go away”. It is one of the best-known and oldest stock market truisms. And the saying is justified. In my article “Sell in May and Go Away – in 9 out of 11 Countries it Makes Sense to Do So” in the May 01 2017 issue of Seasonal Insights I examined the so-called Halloween effect in great detail. The result: in just two out of eleven international stock markets does it make sense to invest during the summer...
  • Stockholm Syndrome – Precious Metals Supply and Demand
      Hostages of Irredeemable Scrip Stockholm Syndrome is defined as “…a condition that causes hostages to develop a psychological alliance with their captors as a survival strategy during captivity.” While observers would expect kidnapping victims to fear and loathe the gang who imprison and threaten them, the reality is that some don’t.   Images from the Kreditbanken robbery at Norrmalmstorg in central Stockholm in 1973. The two bank robbers took four hostages, who...

Support Acting Man

j9TJzzN

Austrian Theory and Investment

Own physical gold and silver outside a bank

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com

savant