A cautionary point from Mark Hulbert

Hulbert's latest piece at MarketWatch calls attention to what he calls bullishness "clung to stubbornly." Despite the recent gold plummet, goldbug bullishness hasn't receded all that much. As he elaborates:

Gold timers' behavior this week leads contrarians to conclude that gold's correction is not yet over.

That's because optimism among the gold timers quickly jumped earlier this week in the wake of just a couple days of strength for gold's price. And then, after gold bullion plunged anew to fresh correction lows, their optimism didn't fade.

Both are bad signs, according to contrarian analysis. The first suggests an eagerness to jump back on the bullish bandwagon, and the second suggests that the bullishness is being clung to stubbornly. If sentiment follows the contrarian model, on both counts it will be just the opposite at the correction's ultimate bottom....

He's careful to note that this analysis is short-term in nature, and says nothing about the fate of gold a few years out. However, it does suggest that the current correction is not yet done.





I should add that a continued gold drop is consistent with a continued rise in the U.S. dollar, which would be consistent with an unwinding of the greenback carry trade.



However, in recent months, gold's gone on tears when its relative-strength was higher (less bullish) than it is now. This Stockchart.com chart shows it - look at the line at the top: