Gold is friendless – is it a buy?
During this festive season, my thoughts have naturally turned to the gifts that were brought to the infant and sadly, only gold is publicly traded today.
In recent posts, I have shown the gold chart and the EWs I believe are operating. Basically, with bullish sentiment in the basement, the conditions are ripe for a sharp short squeeze rally. That is my starting position. I have been hoping to see a new low below the June plunge low at $1180 (my wave 3). That would set up a likely w5 and set the stage for a huge reversal.
Last week, the low reached was $8 above the $1180 and so could only qualify as a fifth wave if we have a truncated fifth. These are quite rare, but not impossible. But I may have my real fifth wave already in place – but in the gold/euro chart!
Interestingly, gold/dollar has been diverging sharply from the euro/dollar chart in recent weeks. This is not normal, so which one is the odd one out?
Here are the two charts superimposed and last week, the new low in gold/euro is clear:
The previous wave structures in euros and in dollars are identical and this new low in euros gives me my w5. I would guess that there is a strong pos mom div here as well. If we truly are at the start of a rally in gold/euros, that should translate into the gold/dollar chart and verify a truncated fifth (and final down wave).
The alternative interpretation of the gold/dollar chart is the move off the June low is an A-B-B with the B wave at or near completion:
On the weekly, we have a huge potential pos mom div, so that if the potential rally has legs, it could carry to the $1400 – 1500 area. There is massive chart resistance at the $1500 area, so that would be a great target.
Either way, if the decline off the $1400 level in the summer is a B wave or a truncated w5, we should have a rally on our hands. January could be a very interesting month for gold, especially if stocks suffer big corrections, as I suspect they will, after the euphoria of the Santa Rally wears off.