Peter Brimelow Reports On Optimism With New Records

In his latest Marketwatch column, Peter Brimelow says gold watchers frustrated by the now-broken $1,420-25 ceiling reversed their pressimism once gold had climbed above that zone.

The Aden Forecast’s Wednesday evening Weekly Update has swung entirely positive: “Now that gold is hitting new highs, it’s still to be seen if this is really the start of an A rise or an extended C rise. In either case, it’s very bullish.”

(Last week the Aden Forecast was still entertaining the possibility that gold remained in the undesirable “D” decline phase.)

Can gold go further? MarketVane’s Bullish Consensus appears to say yes. On Wednesday gold rose to a 2011 high of 80% but the previous night a LeMetropoleCafe correspondent pointed out that, prior to the 2008 crash, tops generally involved several days in the 90s. Mark Hulbert’s HGNSI appeared to support this optimism. ( See Mark Hulbert’s March 2 column. — but after Wednesday’s action, HGNSI jumped very dramatically, to 71.9% vs. a record high of 89.58%, which will certainly disturb contrarians.)

There are two underlying causes in addition to the oil spike caused by Middle Eastern - North African turmoil. First of all, the surge in mainland Chinese imports of gold. Secondly, the U.S. economy undergoing a subpar recovery. Also, Ben Bernanke's performance is inspiring less confidence as indicated by the latest comments of the normally pro-Fed Gartman Letter.


The jump in the HGNSI went along with shrinking skepticism about the rally, it being replaced by optimism once the above-mentioned ceiling was broken. This morning's decline, sad to say, followed that upsurge in optimism. Although $1,420 is holding, the newfound optimists may be in for a whipsawing.