Where is Gold Headed?

Where is gold headed?  Kitco fills us in…

So, has Kitco sentiment suddenly become a good positively correlated indicator on gold bullishness or is it still a good contrary one?  I am curious.

“This week, Kitco’s online survey received 1,085 votes, of which 829, or 77%, were in the bullish camp for next week. The remaining 175 participants, or 16%, say they are bearish, while the other 81, or 7%, say they are neutral. Votes tallied for this survey start from Wednesday morning until Friday at 9:30 a.m. Eastern time.”

Bullish Gold Calls Post-ECB, Ahead of Fed

kitco

“The Fed meeting with no interest rate hike encourages the bulls and implies more stimulus on the way,” argued Mark Leibovit, editor of the VR Gold Letter.

The bulls have been encouraged since early January.

Veteran gold strategist George Gero of RBC Capital Markets said he expects volatility ahead of the Fed as investors focus on rate expectations and the dollar.

Sounds good.

Henry To from CB Capital Partners also focused on the dollar. “The fact that the U.S. dollar cannot sustain a rally lasting more than an hour after the ECB meeting tells me that gold will likely continue to rally for the rest of this year,” he said. He also highlighted investor interest in gold, noting that most investors are still out of the market, which means the positive momentum should continue to run for the foreseeable future.

How Henry, do you extrapolate what happened during an emotional, hype filled hour post-ECB to gold rallying for the rest of the year?

“Fear is hiding out in dark corners, not leaving the scene,” said Richard Baker, editor of the Eureka Miner Report. For that reason, he told Kitco News that he remains bullish on gold this year and has a price target of $1,290 an ounce for the week ahead.

The ‘fear’ bid, which I would re-label as the ‘waning confidence’ bid.

However, Ken Morrison, editor of the online newsletter Morrison on the Markets, pointed to investor interest as a bearish sign. “Strong bullish sentiment in gold as evidenced by Kitco’s weekly survey of Main St. gold enthusiasts indicate it’s time to be cautious at this level,” he said. “The last time open interest was this high was September 2011 as gold was making its record high.” Morrison said his gold price target for next week remains at $1,225 an ounce.

However, the macro fundamentals were much different in 2011.  So while Mr. Morrison is right about sentiment and likely a coming pullback (possibly after a touch of 1308), sentiment is only one element.  The fundamentals are different now; much different.

Here is a picture of gold having forgotten its role over the last month.  After rising hard while everything else ground out a bottom in February, it has more or less gone along for the ‘relief rally’ ride since then.  That is not its proper role in the current phase unless inflation expectations are about to get out of hand in the short-term.  There is no indication of that yet.

gold, crb, spx, emerging markets, euro 50

It is becoming easy for multitudes of people to tout gold as bullish now.  It went up when everything (but T bonds) went down.  It went up when the risk ‘on’ trade went up.  Kitco’s survey is 64% and 77% bullish… what’s not to like?  ←[Sarcasm alert]

Subscribe to NFTRH Premium for your 25-35 page weekly report, interim updates and NFTRH+ chart and trade ideas or the free eLetter for an introduction to our work. Or simply keep up to date with plenty of public content at NFTRH.com. Also, you can follow via Twitter @BiiwiiNFTRH.