The Gold Fear and Greed Index
GoldSentiment’s Gold Fear and Greed Index helps investors determine if gold and silver are fairly priced, or instead being driven by excessive levels of fear or greed.
Learn more about the Fear and Greed Index construction and data sources used below.
Updated weekly, last update on November 15th, 2024
Understanding the Gold Fear and Greed Index
Sentiment Analysis
Sentiment analysis offers investors an important form of analysis when determining when to buy or sell a certain market. Often used when investing in the stock market, sentiment analysis also works well for other markets, like gold and silver. It can also provide helpful insights with the other commodity markets or currency markets as well. Separate from fundamental or technical analysis, sentiment analysis offers a view into market participation that other forms of analysis simply can’t. For a more thorough understanding please visit our gold and silver sentiment analysis page.
Our Gold Fear and Greed Index Components
Risk Appetite
Risk appetite measures the riskiness of the assets investors and traders buy and sell. For example, when investors buy assets with higher levels of volatility compared to “safer” assets their preference signals an increased risk tolerance. Furthermore, risk appetite is a useful component within a gold fear and greed index because it tends to be mean reverting over time.
For example, in equity markets, a preference for small companies over large can signal an elevated risk appetite. Similarly, a preference for growth over value often signals an elevated risk appetite as well.
Breadth
Breadth measures the level of participation with a certain market or sector. In general, markets with high levels of “greed” tend to show most or all related assets moving together. Similarly, strong market breadth indicates a market where most market participants agree on trend and market fundamentals.
Momentum
Since price action determines momentum, momentum indicators effectively signal when price action is extreme or neutral. Although helpful, price alone must be used sparingly within the construction of a sentiment index and shouldn’t be relied on solely. At many times throughout history price trends have continued for much longer than participants expected, trend following strategies excel during these times. Furthermore, when strong fundamentals and light investor participation coexist then market prices can continue to new highs even though investor sentiment remains subdued. In this hypothetical case, conditions justify the strong momentum and lower prices shouldn’t necessarily be expected in the near term.
Positioning
Sometimes difficult to quantify but often valuable, investor positioning helps to determine how concentrated a market is. For example, futures traders have used COT data for decades to determine the concentration within a market. They wanted to decipher whether all participants were concentrated long (or short) or if a market was more balanced and comprised of many investors on either side.
Data Source: CFTC Commitments of Traders Report