The last time such gloom set in about gold, the precious metal staged a rally. This time may be no different, according to
MarketWatch columnist Mark Hulbert.
Hulbert said contrarian analysis shows gold — underloved by investors for a long time — is approaching a bottom.
"Just this week, for example, bullion hit a fresh three-month low, among indications that gold's recent decline has violated some key technical levels," he wrote.
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"But what contrarians focus on is market sentiment, and on that front there has been a big change: For the first time in a long time, a large number of short-term gold timers have decided to throw in the towel."
Contrarian analysis holds that when the majority of investors are leaning one way, the pendulum swings the other way. For markets to work properly, not everyone can make a profit.
"The last time the typical gold timer was as gloomy as he is today, gold began a two-month rally in which it gained more than $200," Hulbert explained.
Gold for December delivery was little changed at $1,238.90 an ounce by 7:13 a.m. on the Comex in New York, after earlier declining to $1,232.80, the lowest for a most-active contract since Jan. 23,
Bloomberg reported.
Hulbert said the average short-term gold market timers that he tracks and measures are recommending that their clients allocate nearly half of their gold-oriented portfolios to going short the market.
"Sentiment is not the only thing that moves the markets. And even when contrarian analysis is right, it doesn't necessarily have pinpoint accuracy," Hulbert noted. "But, because sentiment analysis has been on the correct side of this gold market in recent months, it's definitely noteworthy that it's now more optimistic.
However, precious metals analysts at HSBC are not in the bull camp on gold yet,
Kitco News reported.
To the contrary, HSBC believes the Federal Open Market Committee (FOMC) could push gold prices even lower as they try to negotiate an exit strategy for the central bank's ultra-easy monetary policy.
"While bullion prices at current levels reflect, to an extent, expectations for tighter monetary policies, it does not preclude prices from falling further should the upcoming FOMC statement be viewed as more hawkish than anticipated, in our view," HSBC economists said in client note, according to Kitco.
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