Too Soon to Move from Equities to Gold

Source:

...I would still say own a small percentage of gold, it's just not the right time to cash in your equities and move it in to gold. That trade is already priced into the market.

...What we are currently seeing according to Mark Hulbert from Market Watch is a very bullish signal from the short-term gold timing newsletters. I have only been following this commentary for about 6 months and I have been amazed as to how accurate this indicator has been in the gold market. I usually hear about important updates through Jon Nadler's daily gold commentary. I hope that bullish signal didn't excite you too much because this is in fact a contrarian signal. Usually when an asset tumbles, sentiment shifts to bearish. Think about this. Gold and the S&P are off similar amounts from their recent highs, yet S&P sentiment is extremely bearish, while gold is extremely bullish. Currently, 30.7% of short term timing newsletters are bullish, a higher level than when gold broke its previous supports down to $750.

As we saw with the passing of the rescue bill through congress last week, when an event is priced into the market there is little, if any, upside. Intrade had the odds at 90% of the bill being passed, a reflection of what was priced into the market.

I will say this - inflation fears are real! How it plays out is unknown. Gold is still pricing in too much inflation sooner rather than later. Deflation is a likely reality in the short term, depending on whether or not global governments and central banks are able to put confidence back into the banking sector.

I would still say own a small percentage of gold, it's just not the right time to cash in your equities and move it in to gold. That trade is already priced into the market.

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