Gold: One False Move and It's "Away We Go" | Elliott Wave International

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Gold: One False Move and It's "Away We Go"
EWI's Metals Specialty Service uses objective Elliott wave analysis to navigate the near-term trend changes in gold

By Nico Isaac
Tue, 14 Aug 2012 16:30:00 ET

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Over the last few months, gold prices have taken investors on a jarring ride of regular double-digit, single-day, up-down-swings. (See basic chart of gold prices since May 2012)

And, according to a recent online interview with a veteran gold stocks analyst, attempting to stay ahead of gold's price moves has officially gone from chasing a wild goose -- to -- Wild Goose Chase. Here is an excerpt from said interview:

Reporter asks: "How high could gold go?"
Expert answers: "Predicting gold's future price is a fool's errand because nobody really knows... It's a function of the macroeconomic environment."

We respect such opinions, but in our view, the real "fool's errand" is precisely trying to predict gold based on macroeconomic data. Reason being: The mainstream's interpretation of news events is speculative, ever-changing, and subjective. Here, the following string of August 14 media reports regarding gold step in:

Gold prices open higher: "Gold Advances on Speculation Central Banks May Add to Stimulus. It looks like the gold market will continue to be held up. The downside risk is limited." (Bloomberg)

Gold prices turn down: "Gold Prices Sink. Await Signs of Monetary Easing." (AP)

Gold prices up again: "Gold Steady to Slightly Higher Ahead of US Retail Sales." (Forbes)

And, back down: "Gold Drops Below $1600/oz After US Retail Sales Data." (Reuters)

Now, while no method of market forecasting is 100% "fool-proof," Elliott wave analysis stands apart by examining the main trend-changing force internal to all finanical markets; namely, social mood -- which also unfolds in objective wave patterns on a market's price chart. Each pattern adheres to specific rules and guidelines governing wave length, depth, and often duration.

EWI's premier Metals Specialty Service stands in the lead for providing comprehensive coverage of the Elliott wave patterns underway in gold's near- and further-off price charts. Right now, Metals Specialty Service's "monthly" analysis of gold uses the chart below as the background for this compelling interpretation of price action:

(Editor's Note: Elliott wave labels and "the line in the sand" have been removed from the chart)

"Gold's KEY question remains whether a decline from the early September peak has bottomed."

And the "KEY" answer is in Metals Specialty Service's "key support area" -- i.e., a price level on the chart that gold must respect. One sustained move below this level, and gold could easily replay its 20% sell-off from September.

Don't wait another minute for the complete, objective picture of gold's future.

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The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.