GOLD PRICE NEWS - The gold price rose pushed back up above $1,250 Thursday morning after sliding yesterday on the back of declining risk aversion on Wall Street. Investors sold investments tied to the gold price as the broader stock and commodity markets posted strong gains. Oil, copper, and the S&P 500 all gained 3% yesterday. Gold prices traded as high as $1,256 on Wednesday, a mere $9 below the yellow metal’s all-time high.
Gold producers and explorers are moving higher this morning after falling yesterday in tandem with the gold price. After yesterday reaching a 14-week high earlier this week, the Market Vectors Gold Miners ETF (GDX) retreated as investors moved funds into more economically-sensitive investments. Despite yesterday’s drop in the gold price and the GDX, they remain higher by 13.7% and 14.3%, respectively, thus far in 2010.
Gold prices continue to be supported by inflows into gold bullion-backed exchange traded funds. The SPDR Gold Trust (GLD), the world’s largest gold ETF saw its holdings rose to 1,304.028 metric tons of gold on September 1, giving the popular investment product a market value of $52.2 billion using the current spot gold price.
Coming off of its worst August since 2001, the Dow Jones Industrial Average (DJIA) climbed 255 points to 10,269. Sentiment on the broader market has turned notably bearish in recent weeks, as evidenced by the latest Investors Intelligence sentiment survey. The percentage of bullish advisors fell to 29.4% from 33.3% last week, while the percentage of bears rose to 37.7% from 31.2%. From a contrarian perspective, the growing number of bears is a bullish sign for investors.
While sentiment on the overall market indicates the potential for a rally, a closely followed indicator on gold price sentiment, the Hulbert Gold Newsletter Bullish Sentiment Index (HGNSI), may suggest caution. After falling as low as 9% two months ago, the latest HGNSI rose to 52.1% this week, its highest level in more than seven months.
HGNSI founder Mark Hulbert noted that during each of the five times the index has surpassed 50% over the past three years, the gold price moved considerably lower over the next several weeks. The HGNSI was at just 37.8% in June 2010 the only time the gold price traded above current levels - a meaningful divergence according to Hulbert. However, it is important to note that the HGNSI is a short-term indicator, and does not attempt to predict moves in the gold price over a longer period of time.
Market Vane’s most recent bullish sentiment on the gold price reading stands at 74%, up significantly in recent weeks. However, while gold bulls have certainly soared on the back of the stronger gold price, this most recent reading remains significantly lower than figures posted just before meaningful corrections in gold - such as the near 90% bullish consensus numbers that were seen in May of 2006 and December of 2009.
