NEW YORK -- Gold's spot price closed at $434.30 on Friday -- its highest level since December 1988. It's been trending relentlessly upward since May.
But the Hulbert Gold Newsletter Sentiment Indicator, which reflects the average recommended exposure to the gold market among a subset of gold-timing letters tracked by the Hulbert Financial Digest, is only at 57.41 percent. It has not moved for some time.
This stolidity is in dramatic contrast to the Hulbert Stock Newsletter Sentiment Index (HSNSI), which reflects the average equity market exposure among a subset of short-term market-timing newsletters.
As of Friday night, the HSNSI stood at 55.07 percent -- up from 48.9 percent the day before and 27.9 percent in September.
Mark Hulbert has concluded that on a contrarian analysis, this stampede of bullishness suggests that the post-election stock rally is overdone.
But he doesn't feel that way about the gold rally. It just hasn't attracted the same enthusiasm from the letters monitored by the HFD. So -- Hulbert tells me -- it may go on.
Similarly, the gold stock indexes -- the Amex Gold Bugs index (HUI) and the Philadelphia Gold and Silver Index (XAU) -- are well below their recent highs.
Over the weekend, the Australian gold service The Privateer.com came up with this quote:
"'Interest is very limited,' sighs Caesar Bryan, manager of the Gabelli Gold Fund (GOLDX), who ruefully concedes to being the longest continuously-serving manager of gold funds in North America. Cash flow is light. 'Anecdotally I hear this is true across the group.'"
The Privateer believes gold is in a major bull market. A close above $440 would signal a breakout.
And then there's the Elliott Wave forecasters grouped around Robert G. Prechter. Paradoxically, Prechter is a long-term gold bull. But he has been calling for a savage short-term bear market in gold -- unless it sends a clear signal that would cause him to review his technical work. That signal used to be "a close beyond $422."
Several readers have been interested to know whether Prechter and his lieutenants at the Elliot Wave Financial Forecast accept that this signal has now been given.
Prechter seems to have quietly forgotten about $422. This is not necessarily a gotcha! offense -- the ultimate test is whether an adviser is right, not how consistent his arguments are.
Still, the latest Elliott Wave Financial Forecaster says:
"The rally from the May 10 low of $375.70 has carried higher than anticipated, but the overlapping waves of the rise are clearly corrective. ... Gold should be at a top. A downward reversal would be the start of Wave 3, a multi-month decline. As previously noted, a close above the April 1 high [$436.50 basis December] would cloud the picture and require a re-examination of the wave count."
I read this to mean that futures have to close above the April intraday high.
It hasn't happened yet. But it's getting very close.
