Are there too many gold and bond bulls?

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

Analysts at Strategas have been at the forefront of advocating for a “long” position in gold and bonds throughout the year, a stance that has thus far aligned with market trends. 

However, recent developments suggest that this once contrarian view may now be approaching a point of 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. 

However, the sentiment around gold has become increasingly aggressive, with the market seeing a growing number of investors piling into the asset. 

The sentiment has moved from being contrarian to mainstream, a signal that typically warrants caution. 

They stop short of declaring sentiment as excessively bullish, but it’s something they suggest keeping an eye on for the remainder of the year.

Similarly, bond bulls are becoming less of a niche group. Early in the year, being bullish on bonds was a lonely position. 

Now, there is a crowd forming. This shift reflects broader market movements, especially following recent interest rate decisions. 

The bounce in 10- and 30-year Treasury yields since the Federal Open Market Committee meeting last week 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 reflects broader market concerns, particularly around the persistence of inflation and geopolitical uncertainty. 

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