Mark Holbert's Contrarian Read On Gold Market Optimistic

In his latest Marketwatch column, Mark Hulbert shows a "wall of worry" developing amongst gold timers.

Consider the average recommended gold market exposure among a subset of short-term gold market timers tracked by the Hulbert Financial Digest (as reflected by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). This average currently stands at 33.6%, which means that the average short-term gold timer is allocating two-thirds of his or her gold-oriented portfolios to cash.

Six weeks ago, in contrast, the HGNSI stood at 40.3%.

In other words, gold bullion’s year-end rally to above the $1,400 level, and subsequent retreat over the last couple of weeks back to where it stood in late November, has succeeded in wrenching even more bullish sentiment out of the gold market.

Skittishness in the face of rising prices is good from a contrarian standpoint: it shows a lack of excitement, the kind that turns into panic and a rush for the exits when things go wrong.