Sound recovery

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Written by Julien Mueller | 22 February 2016
Posted in Special research

sentix Strategic Bias for Gold at 3-year high; fundamental attitude towards gold among investors at highest level since 2012. Despite Gold’s 13% surge, upward potential not exhausted.

The sentix Strategic Bias for Gold hits at .42 index points the highest reading since 36 months (see Chart below). The sentix Strategic Bias for Gold measures, due to its composition, investors’ expectations at what price level gold stands in six months’ time. Therefore, the indicator reflects the fundamental attitude of investors towards gold. Moreover, our time series reveals that when the sentix Strategic Bias has experienced a similar development in the past, gold prices have increased on average 5% in the following 16 months.

  20160222 iif gold eng

In addition to gold’s 13% increase, our price projection looks rather ambitious. Under consideration of positioning data, though, it looks quite realistic. The latest developments in gold prices are not as strongly reflected in the FTSE commitment of traders positioning data as it were the case in 2014/15. Potential exists that investors will translate their positive attitude into further gold purchases. According to our analysis, the latest recovery behaves fundamentally different from short-term recovery cycles of the previous three years.

Background

sentix Strategic Bias, investors‘ 6-month expectations, is also polled on a weekly basis since 2001 as part of the sentix Global Investor Survey. It reflects the strategic view of market participants as well as their basic convictions and perceptions of value for a given market. As this indicator represents investors’ general willingness to buy or sell it should not be interpreted as a contrarian signal. Rather it is usually leading the market by several weeks. And as the indicator mainly stands for investors’ longer-term convictions it is an indicator coined by the “wisdom of crowds”, bundling the knowledge floating around in a market of heterogeneous players.

The latest survey was conducted from February 18th to February 20th 2016 and incorporates market opinions of 1,134 private and institutional investors.

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