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An "Acid Test" For Gold
EWI's Metals Specialty Service reveals whether gold prices score in favor of the bulls or bears.
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By Nico Isaac
Fri, 09 Mar 2012 17:00:00 ET |
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If you've been following mainstream financial reports on gold for some clue as to the precious metal's near-term trend, you might be experiencing what I like to call a funda-Mental Breakdown. Symptoms include illusions that one single news event can move gold prices in two totally opposing directions... within hours of each other.
Here, the following string of gold-related news clips captures the erratic cause-and-ONE-effect-then-ANOTHER-effect breakdown of "fundamental" analysis logic:
- March 8, 8:39 PM: Strong U.S. economy is bullish for gold: "Gold Rises On Economic Optimism. Gold will actually rally on the back of more confidence. And the US is recovering."
- March 9, 11:16 AM: Strong U.S. economy is bearish for gold: "Gold Slips On Strong US Jobs Report."
- March 9, 3:10 AM: Weak Chinese data are bullish for gold: "Gold Edges Up After a string of data showed China's factory output, investor and retail sales slowed in February..."
- March 9, 12:20 PM: Weak Chinese data are bearish for gold: "Gold Price Lower On Weak China Growth."
It's time to reclaim your sanity. On March 9 at 10:06 am, EWI's
Metals Specialty Service's "Intraday" gold analysis outlined a clear and decisive
"acid test of gold's near-term" trend. The test is two-fold:
- First, Metals Specialty Service calculated a key 50-and-200-day moving average price zone. If gold prices see a "sharp and sustained" move above the upper line of the zone, it will be a bullish sign. Conversely, if gold prices brake through the lower line of the zone, it will be a bearish move.
- Second, Metals Specialty Service presents the following chart of gold prices versus the Relative Strength Index, a momentum indicator. The RSI offers valuable clues about the internal strength of a market's trend. A falling RSI correlates to downtrends, and a rising RSI to uptrends. And when the RSI diverges with the price, it often signals a change in trend. Case in point: In late February, a bearish divergence in gold took place when prices continued rising -- while the RSI had already turned down.
The latest, March 9 daily gold forecast chart inside Metals Specialty Service shows you where gold's RSI stands today.
Metals Specialty Service Editor Mike Drakulich uses the Wave Principle and 30 years of market experience to help you replace the endless market possibilities with higher-confidence probabilities.
Subscribe today to get Mike's expert intraday and daily Elliott wave forecasts complete with key price levels, targets and valuable insights for gold, silver and other major metals.
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Tags: Chinese markets, Gold, precious metals, Relative Strength Index (RSI), Elliott Wave trading