Mark Hulbert's Contrarian Analysis Says Run Is Solid

Gold's run close to $100's worth since its Jan. 27th low. In his latest Marketwatch column, Mark Hulbert says the run-up has been accompanied by an unusual amount of skepticism.

In early December, for example, when gold hit what so far has been its all-time high, bullish sentiment was nevertheless much lower than it had been on several other occasions over the previous several years. And over the subsequent six weeks, during bullion’s $100 correction, what bullish sentiment that had existed rapidly evaporated.

On both counts, contrarians could detect little of the enthusiasm and outright exuberance that signals an imminent major decline.

And, sure enough, gold’s correction turned out to be quite modest, and bullion is now back to within shouting distance of its early December high....

The $64,000 question now, of course, is whether gold’s rally will soon take the yellow metal into new high territory. Contrarians are betting that it will.

That’s because the mood among gold timers remains quite restrained. The HGNSI currently stands at 45.3%, just half of its all-time high of 89.6%. In other words, despite gold being only a few dollars shy of its all-time high, the average gold timer is still allocating more than half of his gold portfolio to cash.

He adds a caution that the skepticism doesn't guarantee a challenge of the current record high, but he does specify that skepticism means untapped reservoirs of bullishness.


I think I know why the gold timers have been so cautious right now. After a big run, gold normally waits several months before continuing again. Any run like the current one is going to be discounted because a consolidation phase implies it's not going to go very far before tailing back. Timers just don't see potential for a really big gain right now.

As for skepticism back in the fall, it's likely due to timers watching ETF figures and not seeing record holdings as the metal advanced. They evidently underestimated physical (and, in India at least, jewelry) demand taking up enough to keep the rally going.