“A Remarkable Level of Skittishness in the Gold Timing Community”

With the gold price tumbling from a new all-time record high of $1,922.20 to near $1,800 per ounce in recent weeks, sentiment toward the yellow metal has fallen in-kind.

Over the past ten days, the Hulbert Gold Newsletter Sentiment Index (HGNSI) – which measures market timers’ recommended exposure to the yellow metal – dropped 20 percentage points and sits far below levels associated with intermediate-term tops in the price of gold.

Mark Hulbert, founder of the HGNSI, addressed the growing chorus of calls that the gold price has reached a top in light of the recent drop in sentiment.  ”Is gold forming a bubble?” he questioned.  ”It seems that way to many, given its stunning rise in recent months. Their speculation has been fueled by no shortage of posts in the blogosphere that declare gold to be in a blow-off similar to the final stage of the Nasdaq Composite’s rise before the Internet Bubble burst in March 2000.”

Hulbert noted that if the gold price had risen as much as the Nasdaq Composite did during the tech bubble, it would currently be near $3,200 per ounce.

He went on to note that “There is an even more fundamental distinction between the top of the Internet Bubble in March 2000 and the current gold market: Then, the typical stock market trader believed stocks were headed much, much higher — and, therefore, that any pullback should be used to buy more…Believe it or not, when the Nasdaq Composite underwent its first 10% correction off of its March 10, 2000, high, the HSNSI rose 20 percentage points — rather than falling, as is the usual pattern in the wake of declines.”

“In today’s gold market, in contrast, there is a remarkable level of skittishness in the gold timing community,” Hulbert added. “That is not the typical sentiment hallmark of a top of a bubble…Someday, of course, the gold market will hit a major top and undergo a significant decline. But, on the assumption that this major top will be accompanied by stubbornly held bullishness, we are not at that top today.”