Gold/Silver: Brief Pullback Then Higher

The market will always from time-to-time remind us that nothing goes straight up in the stock market. The mining stocks, especially the riskiest juniors, have had huge run since mid-March. The HGNSI (Hulbert Gold Newsletter Sentiment Index) has been a remarkably reliable contrarian signal for mining stocks over the years. Sell/take profits when it moves above 60 and buy with both hands when it goes below 20.

The HGNSI has pushed up to 86% last week (86% of gold newsletters have buy recommendations). Mark Hulbert commented that “the HGNSI jumped today in concert with gold, and now stands at the 99.8th percentile of the distribution since 2000; the HGNSI’s current level represents extreme bullishness.” The latest reading (July 15th) is 76 – still too high to be aggressive with positioning.

A red flag for me is when a bullion bank like Goldman Sachs sticks a $2,000 price target on gold. Why $2,000? Why not $2,500? For me, the HGNSI and bullish price targets for gold from Wall Street banks after a big move has occurred already is a signal to take some profits or hedge my mining stock portfolio.

With the massive scale of fiat currency devaluation – aka money printing or “QE” – there’s an “invisible hand” of economics that seems to have, for now anyway, put a floor under the gold price. Add to that the enormous appetite for physical gold imports from India, which was the equivalent of waking up a starving elephant when quarantine restrictions were lifted, and any pullback for which I’m looking could be shallow and short-lived.

Chris Marcus (Arcadia Economics) and I discuss the gold market technicals. And I’ll go one up on Goldman and call for $2,000 gold before Labor Day:

You can learn more about  Investment Research Dynamics newsletters by following these links (note: a minimum subscription period beyond the 1st month is not required):  Short Seller’s Journal subscription information   –   Mining Stock Journal subscription information

Note:  I do not receive any promotion or sponsor payments in any form from the mining stock companies I present in my newsletter. Furthermore, I invest in many of the ideas personally or in my fund.

********