Gold is now down 4% year to date, and the negative sentiment is basically off the charts.
We can measure sentiment using a few different metrics, and right now they’re all saying that basically no one is bullish on gold.
In fact, one major index that tracks bullishness on gold stocks in particular has absolutely fallen through the floor:
The Gold Miners Bullish Percentage Index is now at zero. As in: there is no measurable bullishness for this index. It’s the lowest it’s been in a decade. Lower than it was during the Covid crash. Lower than it was in 2017 when gold sold for $1,200/oz at the end of a 5-year downtrend in gold.
You can’t find negative sentiment worse than this – which is crazy given the circumstances. The reaction does not match the facts on the ground. Being down 4% year-to-date is not the end of the gold mining business.
Another datapoint:
RSI basically measures whether an asset is oversold or overbought over a given period, based on how fast the prices move compared to recent price data.
Right now, gold’s RSI is saying it’s the most oversold we’ve seen since 2023, after the Fed raised rates (sending gold lower on the theory that higher rates weaken gold).
We’re in similar territory today, as I referenced on Monday, with the market projecting rate hikes on the basis of stronger than expected job survey data. The fear of higher rates hurting gold seems to be a well-played trope that is true in the short term, but not the long term. I’m sure you wouldn’t mind buying gold under $2k/oz in 2023 again, if you could.
Gold moved much higher in 2023, from this same exact oversold RSI metric we’re seeing now.
One more chart – for historical context:
We’re basically in lockstep with the inflation story we saw in the 1970s. If this trend continues, it means we’re getting close to the final, and biggest run-up in this gold bull market which will last for another 3+ years.
My overall point: if you’re not viewing this negative sentiment as a buying point, you should be. It’s unlikely that sentiment will get worse. We might see some red ink in the gold markets, but history tells us that in the long term, we’ll be much higher from here.
Don’t ignore this evidence. Hold your nose if you have to – but put money to work now!
Best,
Garrett Goggin, CFA, CMT
Lead Analyst and Founder, Golden Portfolio