Investor sentiment towards gold has been bearish, and this is looking more and more like a bull signal.
Figure 1 is a weekly chart of gold, and the indicator in the lower panel looks at the amount of assets in the Rydex Gold Fund. Prior to 2003 (small rectangular box), the amount of assets in this fund were unremarkable and were confined to a much lower range. Then gold broke above $300 and a new bull market was launched. As is typical, this attracted new assets, and the old extremes of the old ranges no longer applied. This is bull market behavior.
Figure 1 Gold/ weekly
So with the new bull market in gold, there were also new ranges to the amount of assets in the Rydex Gold Fund. Currently, the amount of assets is just outside the lower end of that range and near the levels last seen in 2008. While this could have been the start of a new dynamic (i.e., bear market) for gold that saw interest in gold wane, I stated to subscribers (2 days ago) of our Daily Sentiment Report that I was willing to let the markets prove me wrong. 2008 turned out to be a good time to buy gold, and until proven otherwise, I was expecting the same in 2012.
I think I will be right on this one, and looking at past moves, we are still early. So hold on!