"Gold falls $200 from Tuesday's record high," reported an August 25 Reuters headline.
The day before, as gold was falling to its biggest one-day loss in 31 years, one headline said, "DJIA Wobbles, VIX Gains as Uncertainty Rises" -- which raises the question: If gold is supposed to be the ultimate hedge against "uncertainty," how come it's falling when uncertainty is rising?
Bottom line, something strange is going on with gold -- if you go along with the conventional perspective, that is.
"...gold is now falling in triple-digit increments. As it does so, the recent hit parade of gold sentiment...signals continues. Back at the end of a spike high on August 11...the CME raised margin requirements. Last week, Venezuela’s president Hugo Chavez said he will repatriate more than 200 tons of gold held in foreign countries, one of the biggest physical transfers of gold in history. Monday’s Short Term Update noted that the Daily Sentiment Index (trade-futures.com) hit 98% bulls. Another...development is a hardening bullishness surrounding the central banks’ gold purchases. If you were with us in June, you will remember this comment from The Elliott Wave Financial Forecast:
Central banks are now expanding their gold reserves. This behavior is the exact opposite of their action at gold’s low in 1999-2001. Back then, the Bank of England was selling its gold reserves, as were 14 other European central banks. At the 1999-2001 gold low, prices had already declined for 20 years, so government officials felt confident enough in the trend to dump gold reserves. Now that gold has risen for ten straight years, central banks again feel comfortable in extrapolating the trend forward and are buying gold.
Today, Bloomberg put the cherry on top with a story that says not only are central banks buying, but they are unlikely to sell, no matter how badly they need the money. The head of corporate services at a China’s largest brokerage firm says European central banks won’t sell their gold because it is not enough to settle their debts. 'Besides, none of the central banks believe in the currencies of other countries.'"
So the question is: Does all of this sound bullish or bearish to you?
Our August 24 Short Term Update gives you Elliott wave-based answers right now, supported by 4 charts that show you gold's most probable direction from here.
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