Tammy: I've got my story;
George: And I've got mine, too;
Both: How sad it is, we now live, in a two story house.
George Jones and Tammy Wynette.
Most traders and investors need a story. Why is the price going up? Or down? What is the reason? Supply? Demand? Earnings? War? These are the questions posed by fundamental analysis, as opposed to technical analysis. It wasn’t that long ago that the bloviating know-it-alls on financial TV compared chart analysis to the study of bat wings and animal intestines.
Fundamental analysis is still the most common trading and investment method used today by individuals and institutions. On the surface, it makes good sense. Beneath the surface, it can get a little murky. Consider this quote from the current issue of the Elliott Wave Financial Forecast:
“…the most concerted attempt at forced credit inflation in the Fed’s history over the past 12 months has not resulted in gold’s big lift-off, as so many pundits have forecast…The widespread, powerful belief in impending inflation, even hyperinflation, is one of the most crowded trades we can remember.”
But that’s just another story isn’t it? And maybe not the story you want to hear. Why is that? If you’re like most market participants, you have a bias. You also probably have an ego. (Who doesn’t?) Sadly, a bias, combined with an ego and a bit of a stubborn streak are likely the most important reasons for lack of success in trading and investment. This is true for gold, stocks, and hog futures. We hear what we want to hear. We believe what we want to believe.
So what’s “The Answer”? If anyone tells you they have it, put your hands in your pockets and walk the other way. If you can run with your hands in your pockets, do so!
Elliott Wave analysis is 100% technical. Applied correctly, it strips away emotion, bias, and ego: what’s left is price as the final and ultimate authority. Presented in chart form, price demonstrates itself in recognizable and repeating wave patterns. These patterns represent the prevailing psychology in all time frames.
So to answer the question posed in the headline: Psychology is the driving engine behind the price of gold. Effective wave counts reveal probabilities upon which one can make investment and trading decisions.
Find out for yourself. Read what Mike Drakulich EWI’s Senior Metals Analyst, is saying right now about the trend in gold. Put your bias aside. Stop trading with your heart and use your head.
Begin now.