What's Driving Gold Prices? Ignorance Isn't Bliss... It's MISSED Opportunity
by Nico Isaac
Updated: August 10, 2022
On September 16, 1968 then Prime Minister of Portugal Antonio De Salazar suffered a massive brain hemmorage and fell into a deep coma. With little hope of recovery, a new leader was established in Salazar's place and the world kept turning.
One month later, however, Salazar awoke with full cognizance. Rather than tell the leader he had been replaced, his counsel conspired in an elaborate ruse convincing Salazar he was still dictator, having him enforce his policies "in private" until the time of his death over a year later in July 1970.
This story speaks to the power of illusion and how, in a private, well-sealed, pre-internet vacuum, it can keep people from seeing the truth. But invariably, that seal breaks and at some point, reality comes crashing in.
Take, for instance, the great ruse of mainstream finance. For decades, the popular pundits have maintained that news events known as "fundamentals" are the ruling dictaor of market trends. But in reality, someone -- or thing -- else is controlling those trends.
Take, for example, the recent performance in gold. In early March, gold prices were on a tear, soaring above $2000 per ounce for the time since 2020. According to the mainstream experts, gold's demand was all-but assured by recession fears, escalating inflation, and the war in Ukraine.
These news items from the time cast the bullish veil:
- "Goldman Sachs Sees Gold Hitting $2500/oz By Year's End" (March 9 Business Insider)
- "Gold Set For Biggest Weekly Gain Since 2020 As War Boosts Haven" (March 4 Bloomberg)
- "Is Now a Good Time to Invest in Gold? The Short Answer: Yes." (March 7 Seeking Alpha)
Wrote MarketWatch on February 24:
"Markets are in full risk-off mode. We continue to see gold as an under-owned, safe haven asset. There was a significant reduction in investment in gold last year which is now in the process of reversing.
"Gold is a well-established hedge against systemic risks and unexpected market events... This is no exception."
And yet, despite gold's bullish "fundamental" leadership, the precious metal peaked on March 8. In the ensuing four months, gold plunged $360-plus per ounce into July 21, its lowest level in 15 months.
There are no fortress walls to keep this fact from coming to light; news isn't driving gold's trend. The Elliott Wave Principle explains what is:
Investor psychology drives market trends and unfolds in recognizable Elliott wave patterns directly on price charts.
Returning to gold, we turn to our Short Term Update on March 9. There, our analyst identified the rally off the January 2022 low as a complete second-wave correction. The next move of significance, therefore, was a powerful third wave decline. From STU:
"In this scenario, Primary wave 2 (circle) made a double top relative to the top at $2072.12 on August 7, 2020. Yesterday, March 8, gold pushed to $2070.29 intraday, less than $2 from the August 2020 high.
"Prices have declined $93.00 over the past several hours as gold volatility is soaring. The DSI Indicators is now at 95, the highest level in over two years, since February 21, 2020. At the same time, Large Speculators are net-long 47.2% of total non-hedging open interest, the most extreme net-long position in 5½-years, since September 26, 2016.
"...The sentiment and momentum extremes suggest a large decline is possible."
This next chart captures what transpired: gold topped on March 8 and plummeted 17% into July 21 before catching its breath. One day before striking that low, Barron's described gold's 2022 selloff as a "disappointment."
But investors who anticipated that selloff from an Elliott wave vantage point would argue otherwise.
As for gold's rebound off its July 21 low, we again refer to Short Term Update. On July 20, STU showed this chart of gold and primed the Elliott wave stage for a move up:
"[Gold] is tracing out an impulse wave from $2070.29, the March 8 high, and is in its latter stages. [The next move] will be a multi-week-to-multi-month rally."
Gold has been in rally mode ever since.
EWI founder Bob Prechter revealed in the 2004 conversational journey Prechter's Perspective:
"Sometimes news appears to fit a day's trading so perfectly that everyone 'knows' the cause of the day's move. Other times the market does the opposite of what everyone would have expected. This unreliability proves that news is not determining the trend."
By contrast, one alternative speaks for itself:
"The Wave Principle proves itself when you merely keep a chart. The wave patterns are repetitive, and at times, over protracted periods, they are easily discernible."
In the end, trading and investing in financial markets carries risk. Elliott wave analysis, along with a tried-and-true arsenal of technical indicators, provides an objective frame to examine potential "windows of change" in the world's leading markets.
Right now, Short Term Update presents near-term analysis of near-term trends underway in U.S. stocks, metals, crude oil, bonds and more!
Golden Opportunities in Markets Across the Board
Do you look at financial price charts and think, "What do these squiggly lines mean?"
Or maybe you wait for "fundamentals" to show the way forward, only to be led astray as this example in gold illustrates.
Right now, our Monday-Wednesday-Friday Short Term Update takes you from passive observer to armored participant. This means, you'll learn how to recognize specific price patterns that show the trend and a price target; or a correction that's about to end; or the vital support and resistance levels for risk management.
Ready to see where the next opportunity could be in not only gold, but U.S. stocks, bonds, the greenback, euro, silver and more?
Then look below for the quick instant-access steps to Short Term Update, individually -- OR as part of the complete Financial Forecast Service.
Short Term Update
Three times each week, Short Term Update editor Steven Hochberg gives investors around the world incisive analysis and a highly readable view of exactly where he thinks stocks, bonds, gold, silver and the dollar will head in the next few trading sessions. He also alerts you to major opinion changes that might occur mid-month.
Financial Forecast Service
All month long, Financial Forecast Service helps you stay ahead of the waves in the U.S. markets on the timeframes that matter the most. FFS covers the stock indexes, bonds, gold, silver, the U.S. dollar, as well as market psychology and cultural trends. It is our most popular service.
Comprises the monthly Elliott Wave Financial Forecast, 3x-per-week Short Term Update and at least 12x-per-year Elliott Wave Theorist.
The wild card for the global markets remains China. You've heard about its real estate problems; now the yuan is on the rocks. Here's our monthly Global Market Perspective contributor, Mark Galasiewski, with a handy chart and a few under-the-radar highlights from the October issue to give you a unique perspective on the situation.
October is almost here, and so far, "things are quiet" in the markets, says our monthly Global Market Perspective contributor Brian Whitmer. But watch as he lists a few items on his radar as he gives you highlights from the new, October issue.
Volatility has reigned on Wall Street this month. One way to measure and predict it is by looking at the difference, or "spread," between the "fear index" VIX and junk bonds. Here's our Head of Global Strategy, Murray Gunn, showing you an interesting chart in a preview of our new, October Global Market Perspective.