Investing in sentiments

Have I gone ga-ga? Investing in sentiments?

Jim Rogers did so... at the start of the commodities bull run. And according to the guru, commodity bulls last for two decades. It's still early days. Detractors exist, of course. At the moment, it's still a Gold Bulls 1-0 Gold Bears.

Listed on the NYSE since Nov 2004, and on the SGX (as a secondary listing) recently, streetTRACKS Gold Shares is a gold exchagne traded fund (ETF) by SSgA. Basically, the ETF is quite an attractive instrument to invest in gold (long or short term), without leverage - a double edged sword, and most importantly, low expenses.

I am inadequate to provide you with hardcore market research material on gold. But here's what I've just learnt:

At the end of 2005, global stock above-ground gold stood at 155,500 tonnes. 52% of which was in... *drumrolls* ... jewellery and 18% was held by central banks. 16% held by Bulls and 12% by industries. Now, it would appear that gold is highly affected by private consumption, in terms of the demand of gold for jewellery.
More importantly, from the demand flows from 2001-2005, 77% of the fresh gold mined went to private consumption, no doubt fueled by the growing/glowing demands for gold by China and India.

The bulls are singing this song:

1. Central banks would not release much more gold to the market. And even if they do, China's central bank might be able to suck up all the gold, if they do desire to.

2. Much of the gold is kept under the bed, as gold necklaces and rings. People, especially ladies, are emotionally attached to jewellery. Could be their dowry, could be their anniversary rings. So even if gold price rises, it's unlikely that under-the-pillow gold re-emerges into the market to depress prices.

Certainly feels like the Gold Bulls are banking in on sentiments.

From the TA point of view, if there is another correctiong, USD490 seems like a very strong support. It's the 50% retractment from USD250 to USD 730. Otherwise, gold seems to be back on an uptrend. Possible cut-loss at USD500.