The Daily Sentiment Indicator (DSI) says the rally will continue in gold

Bob Moriarty
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Mar 19, 2024

Like most other investors I have spent many years seeking out sources of information that will allow me to read the tea leaves of investing to make a profit. I spent thousands of dollars subscribing to one guru after another only to find out what they did best is sell their service. Many times, I would have made a lot more money shorting what they said to buy.

I have naturally been a contrarian. I wasn’t a contrarian out of brilliance, I just realized that almost all of the time we are being lied to by just about everyone. I served in Vietnam for twenty months between July of 1968 and March of 1970 and soon realized that not only is war very expensive, we weren’t paying for it.

If you don’t believe me, name one increase in taxes to pay the seven trillion dollars or so the Global War on Terror cost. I can’t, you can’t. It’s just there.

I am not a gold bug per say. I just realized that if the US wasn’t paying for the cost of the Vietnam War, it had to be a giant negative for the value of the US Peso. In time I began buying gold and silver starting in 1969. Gold was $35 an ounce and silver was $1.29. Both were fixed by the government. You could buy all the $20 gold pieces each containing just short of an ounce of gold for $40. Silver coins containing 90% silver dated earlier than 1965 was easy to find in ordinary change. When I talked about owning gold and silver as protection against the debasement of the dollar, everyone I talked to believed I had lost my mind. After all, the dollar was as good as gold.

Then in January of 1980 some of the people I had tried to convince of the value of owning a hedge against the dollar began trying to convince me to buy more gold and silver. People who hated gold at $200 or $300 an ounce and who knew buying silver at $16 an ounce was the act of a mad man were telling me I didn’t own enough. So I sold right in front of the January 21st top in silver at $50.25 and gold at $875.

Accidently I had turned into a contrarian. I believed it worked but I still lacked the ability to measure ordinary investor sentiment on various investments. There are dozens of ways to gauge sentiment but the very best sentiment indicator I have ever found, and the most accurate, would be the Daily Sentiment Indicator.

The DSI is put out by Jake Bernstein of Network Press. Basically the DSI is a numeric figure between zero and 100 that measures the sentiment of investors of commodity futures. Zero would mean every investor in the known universe hates the commodity. 100 would show that every investor in the known universe loves the commodity.

Please note that Network Press only publishes the DSI only for commodities. That has set up an interesting situation lately. I use the DSI to tell me when gold and silver are about to change from bearish to bullish or the reverse. It does not measure sentiment towards resource stocks. That’s important to note even if most of the time the price of gold and silver stocks tends to follow the prices of gold and silver.

I called a top in silver the day it just about touched $50 in April of 2011. To the day. Dozens of other writers want investors to believe they are GURUs but few have ever predicted anything with great accuracy. I am not a guru but I do follow the DSI. On April 25th of 2011 the DSI was more bullish than it was on January 21st of 1980. You don’t need to be a guru if you subscribe to the DSI.

Along with several other writers probably smarter than I am, the extreme negativity towards resource stocks in the last few years has concerned me. Clearly sentiment to gold and silver stocks, indeed, all commodity shares has hit a new low compared to the price of the commodity or to the general stock market. Gold and silver stocks are the lowest compared to gold and silver, in fifty years. Now that is negative.

But following the DSI showed some interesting measure of sentiment on gold. On March 1st, a Friday, gold shot up about $40 higher. The DSI on gold went from 69 to 78 and continued slightly higher for the next seven days as gold made a new all time high each day. But on the 9th day, on March 12 gold dropped $20. The DSI dropped from 83 to 75, almost as much as it had gone up on March 1st with a $40 advance.

The DSI is telling me investors are highly skeptical about the advance in gold. That is also reflected in the prices of resource stocks. In the first week of the gold advance from the first of the month, my account went up 15% reflecting increasing bullishness. However, even though we are within spitting distance of the all-time high last reached on the 8th of March sentiment on gold and silver have dropped to where they were before the rally started.

This is called “climbing the wall of worry.”

We have had a nice move higher in gold and silver. The market is still skeptical and with even a slight correction, everyone is turning bearish.

That’s a good thing. These markets are going to go a lot higher in my view.

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Bob Moriarty
President: 321gold
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