Contrarian Analysis Leads Advisor To Recommend Gold Again

The advisor is Dr. Steve Sjuggerud, and he bases his call on gold's rising trend meeting momentum-investor skepticism. Here's the nub of his case:

Back in December, the "sentiment surveys" showed investors were at highs for the year. Now that has changed... Two weeks ago, public opinion hit its lowest level since last April (when gold was at its lows for 2009, below $900. Now THAT was a time to buy). That's what we want to see.

Investors have also fled gold stocks since December... For example, the Rydex Precious Metals Fund saw its assets fall by more than half from December to today (from over $350 million to $177 million now). Traders like to use Rydex funds to chase trends. They were bullish on gold stocks in December. Now they've given up on gold stocks. That's what we want to see.

This, in the teeth of record highs in terms of Euros and pounds.


The immediate reason for the skepticism is the newfound strength in the U.S. dollar. More and more greenback bulls are surfacing, and bullish analysts are more quotable. Combine that bullishness with a few gold burns in December, mid-January and early February, and the skepticism isn't all that surprising.

I may be getting overly repetitive with this point, but the fate of gold does hinge upon where the greenback goes. If the U.S. dolar stays in bull mode, there won't be a repeat of April '09's action. Instead, it'll be an upwards - and likely tough - slog.