Gold: Is Sentiment Getting Overheated?

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From Taylor Dart
NYSE:GDX August 6, 2019 11:52am

Where are gold prices headed?

gold %dollars
From Andrew Hecht
NYSE:GDX August 5, 2019 12:09pm

Gold and Silver Retreat After Yesterday’s Fed Announcement

silver bar
From Mike Hammer
NYSE:GDX August 1, 2019 10:47am

Gold Juniors Index (GDXJ): Is It Time To Panic?

Gold: How To Trade The First Inning Of A New Gold Bull Market

Gold
From Taylor Dart
NYSE:GDX July 30, 2019 11:22am

Gold Waits For The Fed

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From Andrew Hecht
NYSE:GDX July 29, 2019 11:45am

Will the rally in silver continue?

From Taylor Dart While silver is likely to punch through weekly resistance at $16.25/oz on a weekly close, a pullback from here to cool off sentiment would not be surprising.  This exuberance in sentiment is being confirmed by Rich Dad, Poor Dad author, Robert Kiyosaki who just yesterday stated it was time to back up the truck on silver.  While silver is likely to punch through weekly resistance at $16.25/oz on a weekly close, a pullback from here to cool off sentiment would not be surprising.
Gold's (NYSE:GLD) incredible run since the June lows came without the accompaniment of its industrial brother silver (NYSE:SLV), but this has changed in a big way the past two weeks. Silver has climbed 10% in just eight trading days, and sentiment has gone through the roof. So much so, that Rich Dad, Poor Dad author, Robert Kiyosaki has come out this week suggesting it's time to back up the truck on the metal. Kiyosaki has been an excellent fade for investors over the past few years, notably pulling all of his money out of the market and calling for a crash just over a month after the 2016 stock market bottom.  The S&P-500 (SPY) went on to gain 40% over the next two years and has never come close to returning to these lows. Both his recent call to back up the truck on silver and the extreme readings of 91% bulls we're seeing in silver sentiment this week are contrarian indicators arriving in unison. Based on this, I believe this is a terrible time to be backing up the truck on silver, and instead believe buying the dip would be a much wiser move.
Silver has gained significant ground the past couple weeks and looks to be on track to blast through the $16.25/oz level which has kept a lid on it for the past several months. This is a significant bullish development which has me leaning bullish medium-term (6-12 months). The issue is that this renewed exuberance from a sentiment standpoint has now adjusted my view to neutral/bearish short-term. We can take a look at this exuberance displayed in sentiment below from Daily Sentiment Index Data.
Looking at the below chart I've built, we can see that bullish sentiment for silver shown in blue finished yesterday at 91% bulls, after four out of five days closing above the 90% level. The sentiment moving average for silver is also above 90% bulls, suggesting that there are nine bulls for every one bear in silver over the past week. This is a significant level of exuberance, and typically this leads to short-term corrections at a minimum. While everyone was out of the water in late May while we sat at 16% bulls for silver, we now have everyone back in the water suddenly, and crowded trades rarely do well short-term.

(Source: Daily Sentiment Index Data, Author's Chart)

  As an example from a similar scenario, the below chart I've built shows DSI data for the March through July period in 2016. As we can see, both silver and the sentiment moving average rallied above the 90% level and stayed there for a week, and this ended up being the high for the year for silver. While I am less inclined to believe we are going to see a 20% correction as we got in 2016, I would be very surprised if we didn't see at least some short-term weakness and a correction of 3-5% short-term.

Source: Daily Sentiment Index Data, Author's Chart)

  For reference, the below chart shows the reading of 97% bulls for silver in July 2016, and how the metal performed afterwards. It was about the worst possible time to back up the truck.

(Source: TC2000.com)

So how does silver look technically?

(Source: TC2000.com)

Silver is attempting to break out above crucial resistance this week at $16.25/oz, and a weekly close above $16.25/oz would be a bullish development medium-term. However, the downtrend line from the past two years comes in just overhead, and I would be surprised if this broke with sentiment at such exuberant levels. When the majority of people have already bought, one can infer that it will likely be challenging to generate enough new buying power to break through a critical level like this two-year downtrend line.
If silver can get through $16.25/oz on a weekly closing basis, I believe that any dips of 5% towards support at $15.00/oz would be buying opportunities.  When sentiment gets exuberant, and analysts that have questionable timing records start telling you to back up the truck, it's time to take a deep breath and be patient for better entries. Impulse decisions with the crowd rarely ever pay off in the market, and this is one of those times for silver currently. The better trade is letting those bulls that are getting greedy back up the truck, and then repurchasing silver off them 3-5% lower as this is the most likely short-term scenario here. While I am bullish medium-term on silver if we can close above $16.25/oz this week, short-term I am leaning bearish until sentiment can cool off.

The iShares Silver Trust (SLV) was trading at $15.35 per share on Friday afternoon, down $0.01 (-0.07%). Year-to-date, SLV has declined -4.00%, versus a 13.48% rise in the benchmark S&P 500 index during the same period. SLV currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #9 of 33 ETFs in the Precious Metals ETFs category.
This article is brought to you courtesy of ETFDailyNews.com.

About the Author: Taylor Dart

taylor-dartTaylor Dart has over 10 years of experience in active & passive investing specializing in mid-cap growth stocks, as well as the precious metals sector. He has been writing on Seeking Alpha for four years, and managing his own portfolios since 2008. His main focus is on growth stocks outperforming the market and their peers. In addition to looking at the fundamentals, he uses different timing models for industry groups, and scans upwards of 2000 stocks daily to identify the best fundamental opportunities with the timeliest technical setups. Taylor is a huge proponent of Trend Following and the "Turtles" who enjoyed compound annual growth rates of over 50 percent per year..
NYSE:GDX July 26, 2019 1:03pm

After hitting a 1-year high, will silver continue to surge?

From Andrew Hecht
NYSE:GDX July 25, 2019 10:56am

Is this gold ETF overbought?

gold bars to invest in
From Taylor Dart
NYSE:GDX July 23, 2019 10:20am

Silver has a BIG rally but the real test lies ahead

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From Taylor Dart: Gold (GLD) was the shining star by a mile in Q2 of the two most sought after precious metals, but silver (SLV) looks like it might finally be ready to join the party.
NYSE:GDX July 18, 2019 1:56pm

What the Silver-Gold Ratio Nearing the Modern-Day High Means For Investors

Can Gold Replace The USD As Reserve Currency?

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One of the stories gold bulls like to tell is the decline of the US Dollar as the world reserve currency. This story usually runs along the following lines: The US is overspending massively, thus the US is a debtor nation. Debtor nations don't last forever, thus the US is heading for collapse. When countries collapse, their currency becomes worthless. Since gold has never been worthless in the history of modern civilization, trade Dollars for gold now so you'll preserve value heading into that uncertain future. That's it in a nutshell, isn't it? When the cow excrement hits the rotating blades you want to hold on to the value you've created in the past.  And you want whatever the best form of money is.  And because gold has always preserved its value well during such crises, you should choose gold.  Simple.  Gold will protect you against the collapse of your country. The modern reality is more complex than that.  In today's world, there is more than one country, and countries don't all collapse at once. When one country collapses there are other countries still standing, and that provides a framework of support that can be used to set your country up again. New deals can be signed, loans can be made with international money, banks can be restarted and linked into the world banking network - it's pretty amazing.  We'll see with Venezuela how quickly this can happen, once the question of who's in charge there is settled. Plus there's the inconvenient fact that gold is difficult to fractionalize.  That means a hunk of gold is often worth more than you need for a purchase.  Imagine wanting to buy a single shopping bag of food in a time when the local currency is worthless, and you are holding your bar of gold. How do you shave off "the right amount" for your purchase?  Even a dime-sized gold coin is worth hundreds of dollars today, much more than your typical food purchase. So the reality is that gold is indeed a great store of value, but there are still issues with using it directly as currency.  What we really need is currency we can both fractionalize and trust - thus the idea of gold-backed currency.  Or, as it's better known, a gold standard.
Your Gold Enthusiast is not saying this is the best answer, however. It is possible to be a gold bug AND realize there is a better solution than going to 100% gold-backed currency. What we are looking for is currency whose value we can trust, and it doesn't have to be 100% gold backed.  All that's needed is a good percentage of gold backing. Whether that's 25% or 50% or even 10% we don't know, we'll leave that to others to debate while we spin some numbers and do some pondering. What we do know is that the US is heading deeper down the rabbit hole of debt.  That's not good. And especially it's not good that two of the other superpowers in the world - China and Russia - are digging themselves slowly out of their own debt rabbit holes, AND accumulating gold.  They are putting their currencies in positions of superior economic strength compared to the US Dollar. And the rest of the world is watching. Both countries are also forming trading alliances with other countries that are not based in US Dollars. China has both their own gold- and petro-dollar based trading contracts.  Russia has been trading natural gas with other countries for years as well.  And let's not forget the EU, which has the purpose of making trade between member countries possible without relying on external currencies or markets. This is all leading to a new multi-polar world, where there are several large superpowers (if you will). Just 10 years ago the US could say it was the world's biggest superpower.  Now China is a viable contender for the crown, and while Russia is much smaller than the US or China it has positioned itself as a rising economic superpower. While the EU is currently caught up in the Brexit battle with England it is also not out of the discussion - just distracted at the moment. Your Gold Enthusiast is watching all this happen and is fascinated by the idea of a multi-polar world. It is a step closer in evolution to everyone getting along, so that is good.  There are still borders and differences, but wars are increasing being fought with sanctions and tariffs rather than shooting, and that's a step in the right direction. Right now the US Dollar is still the #1 currency in world transactions.  It's dominance is shrinking however, and we may yet see the day when gold prices shoot up in US Dollar terms as it already has in many other world currencies. Another writer wrote this very good article about this possible multi-polar world, looking at whether it could be backed by gold. You'll have to read it to discover his answers, and his discussion is well worth understanding. Because of all the variables I don't think anyone can make exact predictions; what we're after is the direction things are likely to go, and where the decision points are that tell us if we're right or not. Why does all this matter?  Because as time passes the future has a way of becoming the present - and then we're living in it. Signed,
The Gold Enthusiast DISCLAIMER: No specific securities were mentioned in this article.  The author is long the gold sector via small positions in NUGT, JNUG, a few junior miners, and covered calls on part of the NUGT position. He has no plans to trade the shares in the next 24 hours.
About the Author 
For 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.
NYSE:GDX July 17, 2019 11:05am

Gold: What Is Sentiment Telling Us

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Gold (GLD) has enjoyed a huge run off of its June lows, thanks to a complete U-turn in Fed Policy. Initially, 2019 was expected to be the year of three rate cuts and a continued effort to cool off inflation, but Powell has walked back all of his comments, and 50 basis points of cuts before year-end are now on the table. While this is a boon for the stock market (SPY) that was dealing with recession worries up until just recently, it's an even bigger help to the yellow metal. The good news for the bulls is that this spike higher in gold has two significant differences between past $100/oz moves higher since 2016. The first is that this move is showing follow-through as gold is not melting off of its highs like it has been accustomed to doing in the past. The second and more meaningful change of character is that sentiment has heated up to extreme levels, and while this may seem like a bad thing, it's actually the complete opposite. I have worked with Daily Sentiment Index [DSI] data for several years and found some interesting nuances that are counter to what common sense might be. I constantly see some analysts harping on the fact that high readings of sentiment are bearish, and low readings for sentiment are bullish. While this is generally true, it is essential to know where these readings are coming within a general trend. The 2011 top in gold occurred with several readings above the 95% level for bullish sentiment, telling us that more than 19 out of 20 market participants were bullish on gold for a full week near the $1,900/oz top. However, this type of bullish sentiment was occurring after an accelerating three-year uptrend, and therefore, this final spike sentiment was buyers capitulation. However, when we get these same type of readings after a multi-year consolidation, this sentiment is telling us something completely different. In this case, it is telling us that market participants are finally warming up to the metal again after a frustrating and lengthy period of disinterest the past few years. The point being is that the 5-year high in bullish sentiment for gold we registered on June 24th was the best thing that gold bulls could have asked for. As can be seen in the below chart, both the December 2017 spike to 91% bulls and the Q1 2019 spike to 90% bulls were unable to eclipse the prior sentiment high of 95% bulls. So what else can this chart of Daily Sentiment Index tell us? As we can see from the red line on the chart, which is a sentiment moving average, gold is trending higher and above its vital sentiment moving average. This is a positive sign as it shows that more bulls are entering the market on an intermediate-term basis.  When more bulls enter a market after a period of disinterest, this typically leads to any sharp dips being bought up quickly. This moving average is also nowhere near overbought at current levels near 60% bulls. As long as this moving average can stay away from the 80% bulls level, the gold bulls don't have anything to worry about here from an exuberance standpoint. Based on this new multi-year high in bullish sentiment that accompanied the recent $1,365/oz breakout, I would expect the most likely scenario is for gold to build a new base between $1,350/oz and $1,450/oz. Breakouts from multi-year bases typically either correct through time or price, and thus far it's looking like gold might end up correcting through time.  This would be the best-case scenario as it would allow the metal to build a new launchpad above its prior multi-year resistance.I would consider any pullbacks down to the $1,370/oz area to be buying opportunities, especially if these dips are coupled with bullish sentiment falling below the 50% bulls level. As long as gold defends the $1,325/oz on a weekly close, I would consider any pullbacks to be buying opportunities. The next real resistance for gold doesn't come in until $1,560/oz. ______________________________________________________________________________________
About the Author  Taylor Dart has over 10 years of experience in active & passive investing specializing in mid-cap growth stocks, as well as the precious metals sector. He has been writing on Seeking Alpha for four years, and managing his own portfolios since 2008. His main focus is on growth stocks outperforming the market and their peers. In addition to looking at the fundamentals, he uses different timing models for industry groups, and scans upwards of 2000 stocks daily to identify the best fundamental opportunities with the timeliest technical setups.  Taylor is a huge proponent of Trend Following and the "Turtles" who enjoyed compound annual growth rates of over 50 percent per year.
NYSE:GDX July 16, 2019 6:04pm

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