On March 2, scientists added a third item to the list of living things able to "Defy the Laws of Gravity": A bumble bee, a hummingbird, and now -- the gold market.
Okay, maybe not officially. But on March 2, as the price of gold soared to a fresh all-time high, the notion of a new, "up-only" paradigm forming in the precious metal certainly felt real.
In the words of two recent news sources:
"Metals. The upward progression seems unstoppable." (Feb. 15 AP)
-- AND --
"Go for the gold. I can't emphasize enough that gold is your antidote here." (Mar. 1 CNBC)
But the fact of the matter is, the upward progression in gold has NOT been unstoppable. On many occasions, said "antidote" to economic uncertainty has fallen in value right alongside equities. From "far away" -- i.e. on a long-term chart -- the trajectory of gold may indeed appear to be a continuous straight line up. Yet when you "zoom in" to a closer time frame, that line has been anything but.
For market participants interested in gold's near-term action, navigating those close-range ups and downs is the ultimate challenge. And, that's where Elliott Wave International's Metals Specialty Service
and its long-term editor Mike Drakulich come in.
Case in point: Back in late December 2010 and early January of this year, Mike "zoomed in" his Elliott wave lens of the gold market to a smaller time frame. And there, a very different picture came into focus: a bearish one. That's why on January 6, 2011, Mike got out his web cam and recorded a 10-minute webinar for his Metals Specialty Service subscribers
, where he presented the following close-up of gold:
Starting from left to right, Mike walked and talked Metals Specialty Service
subscribers through the Elliott wave script "written" in gold's prices.
First, a contracting triangle had unfolded in wave 4 -- a horizontal move between the two converging red lines you see above. Triangles occur in a position prior to the final wave in the Elliott wave sequence -- like in wave 4 of an impulse, as in this case. And once complete, triangles are followed by short, sharp "thrusts" in wave 5, in the direction of the prior trend.
The "thrust" up occurred on cue. But, as Mike explained in the webinar, this was a so-called truncated, or shortened, wave 5 -- a telltale indicator of a weakened trend and perfect precursor to the decline.
Secondly, once the decline after that fifth wave started, it unfolded in 5 waves followed by a 3-wave correction. This is where Mike really began to outline a potential future course for gold. In his own words:
"After a corrective rally that is either done or could work up further, we're going to have another leg down and perhaps headed down to...the $1300 level."
In the days following that Metals Specialty Service
January 6 webinar, the yellow metal indeed lost its luster in a $100-plus sell off right into the cited $1300 level.
How will gold's next move affect you?