Gold sentiment has dropped to an unprecedented level, with negative feelings toward gold and gold mining equities reaching a half-century high, as reported by an asset manager on Kitco NEWS. An occurrence like this has historically led to significant changes for both investors and the general gold market.
Unprecedented Bearishness in Gold Markets
An asset manager writing for Kitco NEWS has pointed out that gold sentiment has hit a 50-year low. According to the latest figures from sentiment indexes, a mere 7% of those in the market are bullish on gold assets, while 80% are looking favorably at the US dollar. It is a clear indication of waning investor confidence in the metal and stands in sharp contrast to the 60/40 bull-to-bear ratio one would normally expect to see.
The numbers have been moving in a negative direction for some time; as recently as two weeks ago, the index for positive gold sentiment was at zero, something not seen since records were first kept. That kind of extreme pessimism is uncommon and shows that gold is not in favor at the moment compared to other holdings, especially with the tech sector enjoying so much attention.
Why Is Gold Sentiment So Low?
There is no shortage of reasons for the historic decline in gold sentiment. The asset manager we spoke with at Kitco NEWS attributed it to the strong performance of US tech stocks and a robust dollar, both of which have lured investors away from gold. In fact, with a mere 7% of indicators positive, one can see that fund managers and traders have shifted their focus elsewhere, finding little appeal in gold or its mining equities under present economic conditions.
Yet there is something exceptional about this degree of bearishness; it may well be an indication that a turning point is near. Markets tend to view such record low sentiment as a signal that an asset has been oversold, making a comeback all but inevitable.
Could This Mark a Turning Point for Gold Stocks?
An asset manager with Kitco NEWS put a different spin on the prevailing gloom, suggesting that the kind of bearishness we are seeing in gold could well be the prelude to a resurgence of interest in mining stocks. After all, there is a long history of contrarian investors profiting from price recoveries once an asset has fallen so far out of favor.
Then there is the matter of the technology sector running hot. Fund managers and traders who have avoided gold up to now may come to view it as a sensible option. Should they make that move, one can expect a new round of capital to flow into gold and its equities, which would go some way toward undoing the historic pessimism of the moment.
Source — Kitco NEWS: https://www.youtube.com/watch?v=hB9ZxEuY_t0