Nothing’s wrong with gold; it’s what’s wrong with peoples’ expectations and perceptions that is the problem, writes Gary Tanashian of BiiWii.com.

Once again I’ll quote NFTRH 208 from October 14, not to be an ‘I told you so’ wise guy (I didn’t definitively tell anybody anything), but rather to highlight how important sentiment is to this sector and also I suppose to toot the horn a little with respect to good risk management.

Sentiment is over bullish in the precious metals. Public opinion is over bullish, Hulbert’s HGNSI is over bullish and the CoT data show that the little and big speculators are over bullish. This should be cleared out before we renew our bullish enthusiasm on a risk vs. reward basis. Broad stock sentiment is in a better state than in the precious metals. It is mostly neutral.”

The over bullish sentiment in the precious metals has been ground down to a current state of numbness at best, and full out despair at worst. Actually, it is the reverse; a state of despair is best for a contrarian opportunist.

I have received hate mail over the years for the way I poke at the gold “community” even as I am and have been a gold bull. That is because psychologically, this “community” fancies itself as the battlers of evil, the doers of good; and do you know what? Evil wins some pretty big battles along the way. I want neither NFTRH’s subscribers, nor myself, fighting that battle.

Rather, a calm perspective is required ALL the time; when a market is surging with bullish enthusiasm and when it is in the grips of despair. It is important to look around the next corner and be prepared. It’s what they taught me in Boy Scouts and it has never failed me.

Putting lectures aside, let’s catch up on gold as measured in a few currencies after a look at the nominal weekly chart.

chart
Click to Enlarge

We have had the support zone in the low 1600′s on radar ever since that area formed as a bottom last summer. Add in the weekly EMA 90 (currently 1611) and you can see critical support for nominal gold. There is nothing abnormal happening here technically, although we are in a time when trend followers and rationalizers are coming out of the woodwork to tell you why gold is broken, it’s bull market is over, etc.

Weekly MACD has shifted the intermediate trend to up but today up feels like down. See how powerful sentiment is?

chart
Click to Enlarge

NEXT PAGE: Gold in the Midst of a Correction