If You Own Gold, Look Out Below

July 22, 2020
Elliot Wave Technical Analyst & author @ Elliott Wave Trader

It has been quite some time since I have published an article on gold. Unfortunately, we have become so busy at Elliottwavetrader that I simply have not had the time to publish many public articles.

So, as we are approaching an inflection point, I thought it would be an appropriate time to publish a public article.

Now, I have to be honest. I am quite disappointed at what I am reading publicly about gold. Many are still trying to sell you on the fact that gold is a hedge against market volatility. They suggest that you need to own gold to protect your portfolio when the stock market tanks. Well, in many past articles, I have outlined that history simply does not support this perspective.

There have been many periods of time wherein gold has rallied alongside the market, such as 2002-2007, and there have been times when gold has tanked alongside the market, such as in 2008. In fact, with 2008 being the most deflationary period of time we have experienced since the Great Depression, how much protection did gold provide to you during the time you most needed it?

Just look at how it has been mirroring the action seen in the stock market for 2020 if you are not yet convinced about the fallacy noted above.

Now, I am not claiming that gold will or will not “protect” you during times of volatility. I am simply saying it is not as simple as so many claim it to be. Rather, those claims are completely intellectually dishonest and are not factually or historically accurate. Most often, those claims are intended to sell you something based upon fear. And, I personally think that praying upon investor’s fear in such a manner is quite despicable.

Instead, you should be analyzing gold on its own to know when it is the appropriate time to buy and sell the yellow metal. That is what we have done for years and have done quite well.

For those of you that do not know our history on metals analysis, allow me to present you with a quick summary.

When we look back at 2011, and we read the articles being published back then and remember back to that time frame, it stands out quite clearly how wildly bullish 99% of the market was at the time. One would have to search long and hard to find an analyst who did not believe that it was a certainty that gold would eclipse the $2,000 mark as the market was rallying parabolically during the summer of 2011.

Yet, in August of 2011, I penned the following warning:

Again, since we are most probably in the final stages of this parabolic fifth wave “blow-off-top,” I would seriously consider anything approaching the $1,915 level to be a potential target for a top at this time.”

And, as we now know, gold topped within $6 of my target and when we broke below the 148/150 support in GLD, we confirmed that we entered into a multi-year correction.

Then on December 30th, 2015, I posted this public suggestion for those willing to listen:

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, 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 fact, when gold was striking its final bottom in December of 2015, I was on the phone buying gold from Doug Eberhardt of Buygoldandsilversafely.com. Since that time, Doug has often noted how accurate we have been with our buys on metals:

I can attest to your accuracy on actually buying both gold and silver from us as close to the bottom as one could. With gold you called it to the letter and your limit order which was placed well in advance executed perfectly. The silver limit orders were within a tight range of the lows as well . . . Your timing on buying the dips is uncanny Avi! People should be aware of this.” - - - Doug Eberhardt – SA Contributor - buygoldandsilversafely.com

Moreover, when silver broke the 12 level back in March of 2020, I got on the phone again with Doug, and bought more silver. I even posted to my members that I was getting on the phone with Doug and putting in an order to buy as we were approaching that 12 level, and many members followed my lead.

Doug later came into our chat room at Elliottwavetrader, and posted the following about our work as well:

Avi has the magic touch. Listen to him . . . And I want to explain to you all what Avi did for you. He got most of you to buy the metals before the premiums shot up and before everyone ran out of product. This is the 2nd time he has done this and kudos to him for doing that for you.”

For those following my work over the last year on GLD, I was strongly urging you to buy gold around Thanksgiving time of 2019. At the time, GLD was around 136. Then in February of 2020, when GLD was around 160, I was expecting a pullback, for which I was primarily targeting the 149 region. But, clearly, GLD broke that support and dropped to our next lower support region of 136 again. Yet, the structure was corrective in nature, which kept me bullish of gold in the longer term, as I outlined to the members of ElliottWaveTrader.

At this point in time, we are approaching the 170-175 GLD target I outlined last year as my main target for 2020. And, now, as we are approaching that target region we set last year, I am expecting a pullback.

Initial support for this pullback is in the 161-65 GLD region, with further support below that in the 141-148 region. The manner in which the market pulls back in the coming weeks will give us greater clarity regarding the depth of the impending pullback that I expect. Once we see a sustained break of 167/168 GLD, then the pullback is likely in progress.

Moreover, depending upon the depth of the impending pullback, the next minimum upside target I have is the 188-197 region in the GLD. Once the next upside structure develops, then we can hone in on the more likely target within that region.

The only thing that would invalidate the potential for the next higher target region is a break down below 141, which would suggest that we will break below the low struck in late 2015. For now, that is clearly not my expectation. But, as we are now approaching an important inflection point for gold, I thought it was an appropriate time for me to present a warning to those that follow my analysis in order for you to be able to protect your positions, if you choose to do so.

See charts illustrating the wave counts on the GLD.

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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.

Nevada accounts for 75% of U.S. gold production.

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