Sentiment for gold price is at most bullish level this year - Steve Hanke
(Kitco News) A new sentiment index for gold is signaling a bullish run. Here's how to trade it.
Steve Hanke, professor of applied economics at Johns Hopkins University, created, in collaboration with his colleagues, a sentiment index for gold — the Hanke-Confas Gold Sentiment Score.
"When we analyze the news, we are not talking about the general sentiment as it affects the market. We are looking at a particular price discovery process in a particular price of a commodity. This is the first time this has been done. And gold is the most important price of any commodity in the world," Hanke told David Lin, anchor for Kitco News.
The index measures whether the sentiment in the gold market is bullish or bearish, which indicates where prices might go next. The index uses a computer algorithm that scans media articles online and screens for "bullish" or "bearish" keywords.
Bullish words include "higher inflation," "deficits," "volatility," "supercycle," and "quantitative easing," while gold bearish terms are "strengthening dollar," "strengthening dollar," "lower inflation," Hanke described.
This is a leading indicator for gold based on this year's price performance. "Right now, the sentiment is bullish," said Hanke. "The money supply has exploded, the velocity of money will be picking up, and we are going to be in for inflation that is at least two or three times the Federal Reserve's target. And that is bullish for gold."
To find out more about Hanke's thoughts on gold, watch the video above.