July 19, 2011, 12:01 a.m. EDT

Gold’s run is almost over

By Mark Hulbert, MarketWatch
CHAPEL HILL, N.C. (MarketWatch) — Brace yourself, gold traders.

Bullion’s extraordinary run is fast running out of steam. Don’t be surprised if gold pulls back in coming sessions.

At a minimum, such a pullback would be a health-restoring event for the bull. However, such a pullback could also be the start of something more serious. We’ll know soon after it begins.

For now, though, the important thing for short-term traders to know is that excitement has grown markedly over the last couple of sessions, and now stands at close to the fever pitch that prevailed in late April. Soon after that previous crescendo of bullish enthusiasm, of course, gold encountered a stunning air pocket and fell more than $100 per ounce.

Consider the average recommended gold market exposure among a subset of short-term gold timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). This average currently stands at 67%, which is within shouting distance of the 73.7% level the HGNSI rose to in late April, which was a several-year high.

The wall of worry that the gold market has been climbing in recent weeks is close to disintegrating, in other words.

This represents a big change from just a few days ago, when that wall of worry remained quite strong — surprisingly so, in fact, given that gold had already run up by quite a bit and was close to its late April peak (which was registered at around $1,560 an ounce). This is what allowed contrarians to forecast that gold would be able to significantly break above its previous all-time closing high. ( Read my Jul 13. column in Barron’s “Gold can head even higher.â€