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Which "Fiscal Cliff" Outcome Did You Choose to Believe Today?
Why taking cues from the news on where gold prices are headed next can lead you astray.

By Nico Isaac
Wed, 02 Jan 2013 17:00:00 ET
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In the opening hours of trading on Jan. 2, gold prices enjoyed a 1.5% rally...before settling back down -- still in the black, yet giving up the gains. As for the "reason" for the yellow metal's bounce, the mainstream experts were all abuzz with ONE main event: the end of the "fiscal cliff" debate.  

The picture they painted was downright action-movie worthy; call it The Bullion Ultimatum. Here's how it was described: In the 11th hour on Jan. 1, lawmakers in Washington leapt from the burning bridge of indecision and irresolution, only to land firmly on solid ground seconds before said bridge went up in smoke.
 
Here, the following Jan. 2 news items set the dramatic scene:
 
·         ""Fiscal Cliff Sends Markets Soaring Higher... The agreement ends months of hand wringing by investors who have feared that a failure by lawmakers would send serious economic shock." (Associated Press)
 
AND
 
·         "Gold Rises As Congress Passes Budget Deal... There seems to be a collective sigh of relief as the full force of the US fiscal cliff that could have dragged the world's largest economy into recession has been averted." (MarketWatch)
 
At first glance, it fits quite neatly into the "news-moves-the-market" package. But there's just one problem: Not everyone agrees the fiscal crisis has truly been averted; not by a long shot.
 
Here, this other pair of Jan. 2 news items tells a very different story:
 
·         "Fiscal Cliff Averted, For Now. The deal leaves a host of questions unresolved - notably, the core issue of the 'fiscal cliff' standoff in Washington has been the country's long-term plan for trimming its debt and the deal doesn't include any significant deficit-cutting agreement." (NBC News)

 
·         The parts of the puzzle are: taxes, spending, and the debt ceiling. The fiscal cliff deal only partially addressed taxes and totally kicks the can down the road on spending and the debt ceiling. The fiscal cliff has only been superficially resolved, but the super cliff is still ahead." (emphasis added, MarketWatch)
 
One event, yet -- two very different pictures of the actual outcome of said event.
 
This, at its very core, is the kink in the armor of fundamental market analysis; namely: Even when news events themselves are consistent -- people's perception of those events is constantly changing.
 
Just think: If gold prices had turned down on Jan. 2, the same sources would have undoubtedly pinned the decline on the "unresolved" nature of the budget deal.
 
When it comes to navigating trends in gold, few other analysts are more objective and comprehensive than the editor of Elliott Wave International's Metals Specialty Service, Mike Drakulich. His Jan. 2 gold analysis gives you in-depth print-and-video gold forecasts for the two most probable Elliott wave scenarios from here.
 
In Mike Drakulich's own words: "I'm going to take my cues from" price action -- NOT from newspapers.
 
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