The Gold Phoenix Will Rise In 2016…But Were The Ashes “Manipulated?”

December 30, 2015
widely followed Elliot Wave Technical Analyst & author @ Elliott Wave Trader

Phoenix, Bird, Decorative, Legend, Story2015 has been quite a year and we have generally seen what I had expected from the market.  The few bears in this market at the start of the year have now been joined by those who were formerly bullish.  So, now, the bears are bearish and even the bulls are bearish.  In fact, most of the former bulls are quick to claim that any rally from this point will likely only be a counter-trend bounce.  And, it also seems that they are all waiting for the $1,000 level to break to buy back into the market.

Back in 2011, it was a “certainty” that the market was going to exceed the $2,000 level, and as we approach the end of 2015, it seems it is now a “certainty” that gold will break below $1,000.  Well, only time will tell as to whether such “certainty” will be seen to fruition, but, more often than not, such expectations are left unfulfilled.

As the market has dropped further and further, we have also been hearing louder and louder claims about “manipulation.”  In fact, one analyst wrote:  “The analysts that for a couple of years have been trying to deny manipulation are ultimately going to look like idiots, and the Sinclair’s of the world are going to have the last laugh, and will be proven correct in the end.”

But, as one of the more astute and experienced members in my Trading Room at Elliottwavetrader.net retorted:

“I love the articles that have a tone like, "it may take many years, but I will be right in the end!!!!" Which is to say you will be wrong 99% of the time, but can't admit it.”  

Those investors and analysts that followed the “Sinclair’s of the world” lost a huge opportunity for price improvement in their investment accounts.  So, who do you think will really “have the last laugh” – those that were appropriately prepared for this correction, and have benefited from it through price improvement, or the “Sinclair’s of the world” that have been holding long during a 50-75% draw down, calling one false bottom after another, and screaming “manipulation” when their multiple “guaranteed” bottom calls did not work out as they expected? 

There is nothing that will come from the manipulation theorist’s claims or perspective, other than lost opportunity.  They have no legally substantiated proof for their claims, so the markets will not change.  Any “proof” they do offer is akin to claiming that a paper cut has caused the entire market to bleed to death.   

There has been no coordinated price suppression which has directly caused a 75% drop in the price of silver.  This is called a “correction,” and it happens in all markets.  And, believe it or not, it happens in the metals market too.  But, if you were not prepared for this correction, then I am sorry for you, and maybe you should consider learning from the experience rather than seeking excuses. 

It is up to investors to do their own due diligence, just like in any other market or any stock, and make prudent investment decisions based upon their due diligence.  And, when one has been that wrong about price direction, one has a responsibility to understand why, rather than seek out excuses.  And, that applies to analysts as well. 

The main problem with those furthering Fed “manipulation” theories is that there is a complete lack of evidence that any flow of funds within the Fed’s balance sheet was run through the gold market to the extent needed to drop the price 45%.  Their “evidence” of Fed manipulation is all based upon circular reasoning, pure supposition, and, ultimately, a lack of reading comprehension rather than an actual flow of funds. 

So, I think we should nominate Foghorn Leghorn as the representative of the manipulation theorists, as his perspective is quite representative:  “Don’t bother me with facts, son. I’ve already made up my mind.”

And, criticism should apply equally to analysts who try to use “manipulation” as a reason the market did not react in the manner in which they told their subscribers to expect.  In their opinion, it is not that they have been wrong.  In fact, they still claim that they are right (as evidenced by the foolish quote of the analyst above).  But, they dishonestly take the position, as Jackie Mason would say, that “it’s all because of those sons of bitches.”  

Most of the time, the “manipulation” card is played because the analyst does not understand the extent of their own lack of knowledge in the market.  Remember, a little knowledge is a dangerous thing.  One must understand their own limitations, and many of these analysts really do not.  When the market does not react as they initially expected, they claim it is because of “manipulation,” and not a flaw in their analysis.  Analysts are human beings, subject to human limitations and failings, and are not always going to get it right when trying to discern the direction of a non-linear financial system.  But, to blame “manipulation” for a wrong call is just truly dishonest.

One has to even wonder why anyone would deploy their own money (or suggest others do the same) into a market they believe to be so manipulated that it supposedly caused a main asset to lose 75% of its value?  In fact, why would they even waste their time with such a market? 

Amazingly, I am quite certain they will claim that the manipulation no longer exists once the bull market resumes. You see, when it comes down to it, there is no intellectual honesty underlying their position.  “Manipulation” is only used for their convenience as a scapegoat for why they have been wrong while the market has continued lower.  And, when we finally strike a long term bottom and begin the next bull market phase strongly off the lows, it will no longer serve their purpose, so the manipulators will magically disappear from the market. But, I digress. 

The last year may have also been a year of revelation for many in the market who have actually taken to heart what we have been “preaching.”  I have been beating the drum for over 4 years that no matter what China, India, Russia do, and no matter what happens in the middle east, or anywhere else for that matter, none of it will make any difference to the price of gold, until it completes its long term correction.  I have continued to maintain that fundamentals or manipulation have not been and will not be what controls this market.  The market entered a long term correction when we expected it to do so back in 2011, and it will complete this long term correction right around the corner and will likely resume its long term bull market again within 2016.

In 2015, some have finally been listening, as you can see from this article earlier this past year,

http://bullion.directory/fundamental-analysis-has-failed/, and it may also be why our Trading Room has grown well beyond several thousand members within the 4 years since we opened.

So, I remain steadfast in my belief and continue to urge all those that deem price improvement important within their own person investment thesis to ignore any article or analysis that attempts to present perspectives about manipulation or about how fundamentals control this market.  It HAS NOT AND WILL NOT help you grow your investment account, so why would you pay it any heed?   In fact, if someone claims the market moved against their perspective because of manipulation, you should be running the other way.  That analyst is clearly telling you that they have no clue as to what will happen in the market and, worse yet, that their analysis system does not work, they really don’t know why, so they have chosen to lie to you rather than admit their faults.

If you have not learned your lesson from the last 4 years, then you will likely find yourself looking the wrong way again when the next larger degree correction occurs in a few years from now.  And, I can assure you that the same list of characters will blame that one on manipulation too, as they do not have the tools to recognize it before it strikes.

As we move into 2016, I believe there is a greater than 80% probability that we finally see a long term bottom formed in the metals and miners and the long term bull market resumes.  Those that followed our advice in 2011, and moved out of this market for the correction we expected, have done quite well, and are now moving back into this market as we approach the long term bottom.  In 2011, before gold even topped, we set our ideal target for this correction in the $700-$1,000 region in gold. We are now reaching our ideal target region, and the pattern we have developed over the last 4 years is just about complete.

For those interested in my advice, I would highly suggest you start moving back into this market with your long term money in 2016.  While I noted years ago that we may see an overly-emotional final price plummet to the $700 region before this correction has completed, at the time of my writing this article, I see no set up to take us down that far right now.  But, I will be alerting those in my Trading Room at Elliottwavetrader.net should I see a set up to take us that low.

As far as miners are concerned, I would not be as aggressive about buying into specific miners just yet, unless you are experienced in this complex.  You see, according to our Miners Portfolio analyst team at Elliottwavetrader.net, there are a number of miners that, based upon their patterns, could very well be at risk of going into bankruptcy before this long term correction completes.  Even though the potential profits are expected to be quite significant over the coming years in the miners, unless one understands the current danger in the gold equities market, it is probably best to wait for a confirmed bottom in the miners before one begins to move into that market aggressively.

So, I would like to take the opportunity to wish you all a happy, healthy and prosperous new year, especially as we prepare to welcome the resumption of the long-term bull market in the metals complex in 2016, so that we may all laugh our way to the bank.

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Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net, a live Trading Room featuring his intraday market analysis (including emini S&P500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education. You can contact Avi at: info@elliottwavetrader.net.

In 1792 the U.S. Congress adopted a bimetallic standard (gold and silver) for the new nation's currency - with gold valued at $19.30 per troy ounce

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