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Why Is Everyone So Bullish On Gold Suddenly?

ByTommy Humphreys
Published 02/12/2016, 12:35 AM
Updated 07/09/2023, 06:31 AM

Less than a month ago nobody wanted anything to do with the yellow metal. Now, suddenly everyone is bullish on gold and the herd is cramming through a narrow doorway trying to get long:

SPDR Gold Shares (N:GLD) (Daily)

GLD Daily Chart

The GLD exchange-traded fund has gone parabolic with a daily RSI(14) of 84.53 and a Force Index(13) that is completely off the charts (below chart). GLD gapped higher well outside the upper 2-standard deviation Bollinger Band and posted one of its highest volume days in history while trading 7x its average daily volume and printing a ‘shooting star’ candlestick.

Options traders have also taken to chasing the momentum in gold bidding up GLD call option implied volatility above the implied volatility of put options for the first time in history:

GLD Put Skew

This massive shift in the GLD ‘put/call skew’ is primarily indicative of two things:

  • A great deal of emotion among traders during the recent rally (bearish short term)
  • A seismic shift in sentiment as traders turn optimistic on gold after 3+ years of pessimism (bullish longer term)

GLD options also traded 4x as many calls as puts today on nearly 4x average daily options volume. The following clip from CNBC earlier in the day sums up the current mood around gold quite nicely; Mark Cuban touting a GLD call option momentum trade that he’s profitable in.

Stuff like this helps to stoke the speculative animal spirits of market participants, while there’s no telling how far the upside momentum can run there is ample evidence to suggest that today was an emotional climax for gold and the GLD.

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Latest comments

Did anyone try calling the GLD hotline at (866) 320 4053 in search of numerical details on GLD's insurance? The prospectus vaguely states "The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody." When I asked about how much of the gold was insured, the representative proceeded act as if he didn't know and said they were just the "marketing agent" for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors.
while I might agree, there is no doubt that gold in terms of behing backed up with something, is much better than anything else. All the currrencies in the world are printed out of thin air, no backup, nothing, it's all debt and debt.
"SPDR Gold Shares (N:GLD)". . Speaking of GLD, anyone know why there is a clause in the GLD prospectus that states GLD has no right to audit subcustodial gold holdings? Why would the organizations behind GLD forfeit this right and create such a glaring audit loophole? I have not heard a single good reason for the existence of this loophole thus far. It also doesn't help that GLD claims to be fully backed by physical gold bullion but yet it refuses to give retail investors the right to redeem for any of these ‘claimed’ gold bullion.. . I also recall there was a well documented visit by CNBC's Bob Pisani to GLD's vault. This visit was organized by the management behind GLD to prove the existence of GLD's physical. However, the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not show up on the bar list dated at that time. It was later discovered that this "GLD" bar was actually owned by ETF Securities.
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