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What to Make of Gold’s Rally at This Juncture

This sentiment indicator hits its “highest extreme” in nearly a year

by Bob Stokes
Updated: January 25, 2023

Many investors are bullish on gold as the yellow metal has staged a solid rally since early November.

Indeed, our Jan. 20 U.S. Short Term Update provided specifics about investor sentiment:

[During the past few weeks], the Daily Sentiment Index Indicator for gold pushed to 92, the highest extreme since it hit 95 in conjunction with [an Elliott wave top] on March 8, 2022.

At that March 8, 2022 top, gold's price hit $2070.29 and around that time, many headlines attributed the precious metal's price rise to Russia's invasion of Ukraine. In other words, as this headline from March 6, 2022 says, gold was seen as a safe haven (CNBC):

Gold climbs to levels not seen since September 2020. How ETF investors are playing the ‘safe haven' metal

However, even though most investors were bullish on gold and many saw it as a safe haven investment, the price of the precious metal entered a period of substantial decline beginning in early March.

The point is: Be aware when sentiment towards an investment reaches an extreme, either bearish or bullish.

As our monthly Elliott Wave Financial Forecast once noted:

When virtually everyone is bullish, there's no one left to buy.

So, after that multi-month decline and subsequent rally, gold has once again reached a bullish sentiment extreme, as noted a moment ago. Here's a sample of 2023 headlines:

  • Why Gold's Rally May Last (Barron's, Jan. 5)
  • Gold surges to 6-month high, and analysts expect records in 2023 (CNBC, Jan. 3)

Now, this renewed gold bullishness doesn't mean the price will turn downward immediately. Sentiment extremes can persist for a time.

However, the current sentiment extreme is definitely a factor to keep in mind.

Another factor to consider is gold's price action in relationship to silver's.

Our Jan. 20 U.S. Short Term Update discusses a divergence between the two precious metals about which you need to be aware, as well as gold's Elliott wave structure.

Learn what you need to know by following the link below.

Our Elliott Wave Financial Forecast Once Said:

"Markets can't fool all of the people all of the time, but they do fool most investors at the most important times."

With that in mind, do know that key financial markets are either at or approaching "important" price junctures.

Get near-, intermediate- and long-term analysis of stocks, bonds, gold, silver, the U.S. dollar and much more as you read our Financial Forecast Service, which is comprised of our monthly Elliott Wave Financial Forecast, monthly Elliott Wave Theorist and the thrice weekly U.S. Short Term Update.

Since most investors are fooled at the most important times, it stands to follow that it's usually best to avoid crowd behavior.

Get the timely insights that you need about major financial markets by following the link below.

Financial Forecast Service

$97

All month long, Financial Forecast Service helps you stay ahead of the waves in the U.S. markets on the timeframes that matter the most. FFS covers the stock indexes, bonds, gold, silver, the U.S. dollar, as well as market psychology and cultural trends. It is our most popular service.

Comprises the monthly Elliott Wave Financial Forecast, 3x-per-week Short Term Update and at least 12x-per-year Elliott Wave Theorist.

A “Freight Train of Grains” Didn’t Cause Soybeans’ Recent Price Crash. So… What Did?

"Crash," "sink," "runaway freight train," and ever-lowering "limbo pole" are a few of the phrases used to describe the May selloff in grains, particularly soybeans. But before you blame the "bombshell" May 12 USDA supply/demand report for the slide, you'll want to read this first.

Commercial Real Estate: Prepare for a Potential Global Calamity

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'How people FEEL is how they ACT'

Like all ideas that make you want to slap yourself on the forehead and scream "How didn't I think of that!", the idea behind socionomics is simple: Social mood impels social action. When you know social mood's trend, you can forecast everything from the stock market to culture to politics and more. So, how then do you define the social mood trend? Watch our Head of Global Research touch on that in this video.