In case you were wondering: You haven’t gotten taller over the last month. The financial sky is just falling in.
Which begs the question: Why have gold prices been going down? After all, according to mainstream economic wisdom, when there’s blood on the Wall Street, it’s time to buy precious metals (or something like that). Yet, despite the hemorrhaging U.S. credit and housing market, gold has lost its luster.
On April 23, one industry “expert” took a stab at solving the mystery: “Gold prices [are] responding to declining crude oil.” (AP)Sure, that explanation works for the hour at hand. But it does little to resolve the market’s performance for the rest of the day, the previous week, or entire past month for that matter.
Check the charts: The most recent downtrend in gold got started on March 17. That same day, crude oil prices turned up in a relentless, $20 per barrel rally to all-time record highs.
Short Term Update posts gold charts and analysis three days a week and is part of EWI's comprehensive U.S. forecasting package, the Financial Forecast Service. The quickest way to get gold analysis on your screen is to read more about the Financial Forecast Service.
Back to square one. There is no fundamental reason for gold to have lost its “safe haven” appeal. Coming across negative economic news these days is like finding hay straw in a haystack. (See: The biggest first quarter revenue loss in Citigroup Inc.’s entire 196-year history, a 77% plunge in Bank of America profits, or the $200-plus billion tab in write-downs -- all culminating in “the biggest financial dilemma for the world since the 1930’s.” (CBS News))
Why the metal is not soaring skyward is now beyond the rationalizing capabilities of the usual folks. In the words of one news source: “Participants continued to be frustrated by the metal’s recent lack of response to outside drivers. Since hitting record high in mid-March, the precious metal has struggled to find direction.” (Commodity Online)
Correction. Gold has had no problem finding a direction since its March 17 high, namely SOUTHWARD, in a sell-off that has slashed more than $130 per ounce from its value. The only “struggle” has to do with the fact that that particular direction goes against what fundamental analysis calls for.
It does not, however, go against what Elliott Wave analysis calls for. In the days leading up to the metal’s recent peak, the March 14 Short Term Update presented a powerful close-up of Gold Prices alongside the headline: “Waiting For A Reversal.”
In Short Term Update’s own words: “Gold hit the psychological motherlode when it pushed to $1000. WE may have to wait until closer to the end of next week before prices make a turn lower, but any decline beneath $960 should be a clear early warning that a declining phase is starting.”
Directly off the metal’s peak, the March 17 Short Term Update follow-up was certain: “This reversal looks like the real deal.”
Bottom line: Gold has turned down because the wave pattern initiated a major change in trend. Whether the reversal has come to an end is loud and clear in the April 23 Short Term Update’s objective commentary and original price chart of the metal.
Short Term Update posts gold charts and analysis three days a week and is part of EWI's comprehensive U.S. forecasting package, the Financial Forecast Service. The quickest way to get this analysis on your screen is to learn more about the Financial Forecast Service.