Gold was again blasted to new post-election lows this week, further trashing contrarian sentiment. The Fed proved more hawkish than expected in its rate hike trajectory forecast, unleashing heavy selling in gold futures. This catapulted gold bearishness back up to extremes not seen in a year. Investors are once again convinced gold is doomed, and thus radically underinvested. That's actually super-bullish for gold.
It certainly wasn't the Fed's second rate hike in 10.5 years this week that hammered gold. Actually that was universally expected. Federal funds futures traders had assigned it an average 96% probability in the two weeks leading up to that rate hike. If the Fed had simply raised its federal funds rate by 25 basis points to a 0.50%-to-0.75% range, gold futures speculators would've likely yawned. They knew it was coming.
The unexpected hawkishness came in the FOMC's Summary of Economic Projections that is published quarterly at…