Market Sentiment on Gold and Bonds

Investing.com — The current market landscape is witnessing a rise in bullish sentiment surrounding both gold and bonds, raising the question: are there too many bulls in these assets?

Analysts at Strategas have been advocating for a “long” position in gold and bonds throughout the year, aligning with market trends thus far.

However, recent developments suggest that this contrarian view may be approaching saturation.

“$2800 has been and remains our Gold target, with near-term support at the upward sloping 50-day average (roughly 2485),” the analysts said.

The sentiment around gold has become increasingly aggressive, with a growing number of investors piling into the asset. The sentiment has moved from contrarian to mainstream, which typically warrants caution.

While they stop short of declaring sentiment as excessively bullish, it’s something to monitor for the remainder of the year.

Similarly, bond bulls are becoming a larger group. Earlier this year, being bullish on bonds was a lonely position; now, a crowd is forming. This shift reflects broader market movements, especially following recent interest rate decisions.

The bounce in 10- and 30-year Treasury yields since last week’s Federal Open Market Committee meeting illustrates that while yields have risen, they remain in a downward trend, struggling against significant resistance levels.

Global bond yields, particularly short-term rates like the German 2-year bond, continue to push lower, indicating sustained pressure on yields.

The increasing number of investors bullish on both bonds and gold captures broader market concerns around persistent inflation and geopolitical uncertainty.

These conditions typically drive demand for safe-haven assets. However, Strategas emphasizes monitoring this crowded trade. In markets, when too many investors take the same side of a trade, it can signal a potential reversal or, at the very least, a pause in the trend.