How To Read A Gold Sentiment Score

EDITOR'S NOTE: To figure out what is happening with gold, you can watch the prices, read the candlestick charts, and make predictions as to where it’s heading. Or, you can do it the easy way and check out an easily-digestible gold sentiment report. This report takes sentiment about gold into account from around the industry and distills it into an easy-to-understand negative (bearish) or positive (bullish) number. GoldSentiment.com also provides interactive charts which “often show patterns that help clarify what is happening to Gold sentiment.” If you are a gold enthusiast but not a gold expert, this is a great way to get a clearer picture of what is going on with the precious metal.

The Hanke-Cofnas Gold Sentiment Dial and Interactive Charts provide a measure of the direction of Gold sentiment. Using our own dictionary of Bullish and Bearish words relating to gold, we track and interpret key words and phrases on the internet when Gold is mentioned. Our process assigns a Bullish or Bearish score based on the frequency of the appearance of those words. For example, if we detect an increase in the mentioning of the words: taper, tapering, a Bearish sentiment score will result. If, in contrast, we detect an increased mentioning of the words: inflation, stimulus, then a Bullish sentiment score will result. Of course, some words will be weighted more heavily in our score, owing to their importance. In the case that new words may surface; our model is dynamic.

In a real sense, the total Gold sentiment that drives the market is a result of many emotions. It is a battle of expectations about economic growth, inflation, deficits, and war, among others. Gold sentiment captures fear and hope.

A good way to proceed with the Dial is to look at the snapshot of the Hanke-Cofnas Sentiment Score each morning and ask yourself: : Is it getting more negative or more positive. Sentiment that has a score of –8 and then shows a shift to –3 is still Bearish, but the Bearish emotions are abating. Some traders would consider that permission to buy. Other traders looking to buy Gold might want to wait for a clear Bullish score. It is up to you! Similarly, if the Dial shows a score of +7 and then shifts to +4, sentiment is still Bullish but, the emotional weather is becoming cloudy!

Our interactive charts provide a technical map of the direction of Gold Sentiment. We calculate Gold sentiment scores every hour, and then we present an 8 hour Moving Average of the Scores. This provides a sense of the Gold sentiment momentum. The 80 hour Moving Average provides insight into sentiment conditions that are accumulating for several days.

These interactive charts often show patterns that help clarify what is happening to Gold sentiment. Is it showing short term momentum? Is it trending? Is it experiencing Resistance and Support? The interactive charts provide answers to these key questions.

Originally posted on The Gold Sentiment Report.