Gold has fallen out of the "gold pit"? Institution: Market sentiment has reached extreme levels, high probability rebound opportunity is now available.

As the Middle East conflict continues to disrupt the global market, the price of gold has recently shown a significant pullback. However, some institutions believe that market sentiment is approaching extreme levels, providing conditions for a rebound in the future. Data shows that since the outbreak of the Iran conflict, gold and related assets have been under pressure. Spot gold has fallen by about 13% this month, potentially recording its worst monthly performance since October 2008. At the same time, the SPDR Gold Shares (GLD.US) ETF, which tracks the price of gold, has fallen by about 14.6% this month, while the VanEck Gold Miners ETF (GDX.US), reflecting the performance of gold mining stocks, has fallen by about 25%. Although short-term trends are weak, SentimenTrader analysts point out that market sentiment has entered the "extremely bearish" range, historically a precursor to a rebound. Data shows that when over 80% of traders in the GLD-related market have been bearish for two consecutive weeks, the probability of a gold rebound in the next 12 months is about 89%, with a median return of over 10%. From an industry structure perspective, the sell-off in gold mining stocks is also significant. A month ago, the proportion of stocks in a technical bear market was still low, but now it has risen to about 95%, indicating a significant "exhaustion" in market breadth. Analysts believe that this combination of "significant price compression + extreme bearish market sentiment" typically corresponds to a typical contrarian investment opportunity. The recent drop in the price of gold from its 52-week high point by about 18.5% has been intensified by the dual impact of political risk from GEO Group Inc and changes in interest rate expectations. With some funds passively exiting positions and "weak investors" gradually being washed out of the market, market structure is becoming more stable. SentimenTrader believes that in the current context, gold has "high probability, asymmetric return" allocation value. Particularly with GLD still holding above the 200-day moving average, the attractiveness of positioning long positions in the next 3 to 12 months is increasing.