Compare Loss In Capitalization of GLD, Apple, Facebook

Gold fell below $1,200 this week, its lowest point in exactly 3 years. The sentiment related to gold among traders and financial institutions has not hit such an extreme point during the current bull market. At the same time the surge in physical demand among the retail public, the East and central bankers remained extremely strong.

Frank Holmes from writes in today’s update:

From time to time, in bull markets and bear markets, prices and fundamentals disconnect. Prices can swing too far on fear and rise too fast on greed. We believe fundamentals remain solid and much of the short-term swings are much ado about nothing. In volatile markets, it is important to trust your investment processes and asset allocation disciplines.

Gold is extremely oversold as appears from the following sentiment indicators. notes it is highly unusual to see this type of sentiment indicators. They are ready for a bounce.sentiment_june_28_2013

From a more mainstream point of view we have repeatedly written that gold has a lot of emotions attached to it. Gold has two camps: lovers and haters. Frank Holmes confirms this with the following quote and chart.

There seems to be an inherent emotional bias against gold by many in the financial media and among money managers, especially after gold corrects. Billions of dollars lost in gold makes for sensational headlines, yet two darling technology stocks have also taken it on the chin. I find it interesting that the naysayers aren’t talking about the fact that Facebook and Apple have caused more destruction in market capitalization over the past year than the biggest gold ETF. The chart below puts the magnitude of decline in context.


A bounce is very likely from here on. Gold is entering its best season of the year, i.e. from August through October. It will be interesting to follow how both the physical and paper market will react in the months ahead.

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