If you zoom out on gold prices it's tough to complain. $1786 is a big jump from the $1100-$1350 for the middle part of the 2010s.
At the same time, you sense the frustration of gold bugs as you peel back the layers. The fundamental backdrop for gold has been sensational as we've gone through a pandemic period of incredibly low interest rates, quantitative easing and shockingly large fiscal deficits. Those are the three pillars of precious metals strength.
Despite that, gold has underperformed most financial assets and has paled in comparison to crypto, which is obviously stealing the marginal buyers.
That will continue to be a headwind but at the same time, gold is still gold and a 4000 year track record as a store of value is tough to argue with.
At this point, gold bugs are tired. There are numerous ways to measure sentiment and they all show that negativity is near an extreme. I'm watching especially closely because the seasonals in Jan-Feb are so strong. I've bought gold in Nov-Dec for years and it hasn't let me down yet.
Maximum depression?
What caught my attention recently was this tweet:
In the 4 years I’ve been in precious metals equities, this right now is peak frustration for me.
— GoldenToilet (@joshmeyerrx) November 27, 2021
The miners have been so, so awful.
The thought of buying any more dips is nauseating. #gold #silver
No disrespect to this person, who I don't mean to single out, but this is the kind of sentiment you often see around a major bottom.It's exactly the kind of thing you want to read if you're a buyer.
More and more I gravitate to sentiment and trading against the broad mood. When there are signs of euphoria, get out of the way. When there are signs of exhaustion, the sellers might finally be done.
Of course that needs to be layered in with the technicals and fundamentals but it's an underrated piece of the puzzle.
Gold is up $3 to $1786 to start the week. Where do you think it ends the year?
