A Turning Point For Gold

Elliot Wave Technical Analyst & author @ Elliott Wave Trader
February 4, 2015

Back in November, as gold broke down through the support held through 2013, the bears came out with their claws. MarketWatch, as well as most other financial news sources, became overwhelmed with articles from vociferously bearish analysts, which compelled me to write my first metals article on MarketWatch in years. If you remember, I suggested to those who would listen that it was not a time to be selling metals, but a time to be buying.

As we came into 2014, many were quite certain that the bottom in metals had been struck in 2013, with a double-bottom formation in gold. However, I was still calling for lower lows coming into 2014. Then, in early November, the market provided us with the lower low in gold that I was expecting, even though silver provided those lower lows in September. Within 24 hours of striking the bottom in gold, I noted to all those in my Trading Room at ElliottWaveTrader that now was the time to exit shorter-term short positions and go long silver and mining stocks. This was the first time in over three years that I suggested to begin going long silver and mining stocks.

Enter 2015. Using Elliott Wave analysis — its sole purpose is to track market sentiment through pricing movement in the market — I see the metals as topping in the near term. While I still see the potential for one more rally taking hold in a wave v of the c-wave of the b-wave top (as you can see in the chart linked below), I think that could be a shorting opportunity for those who are willing to aggressively short this market.

Along those lines, I would like to provide one point of caution. There is potential that the market has bottomed. Should we see another rally in wave v, which is followed by another wave 4-5, as represented by the alternative count in yellow on the SPDR Gold Trust GLD, +0.25%  chart, that would be confirmation to me that the market has likely bottomed. While this is not my primary expectation, I have to say that it will not substantially affect the way I deploy my money into this market. Allow me to explain.

My own trading rules have me buying long positions at the bottom of a 3rd wave in a c-wave of a correction. That bottom occurred in early November, which is why I suggested to be buying those lows. However, I very well recognize that a lower low is still quite likely. So, while these positions acquired in November are very long-term holds for me, I have been hedging those longs up in this region, and will add further hedges should we see the next smaller-degree rally we may get before the metals top. Once we complete the next, and final, 5-wave decline to lower lows in 2015, I will sell those hedges, and convert them into more long positions.

So, at this time, the perspective I am taking in this market, as well as the one I am suggesting to those who will listen, is to be taking the opportunity of lower lows in metals to be positioning yourself for the resurrection of the bull market. Nothing has convinced me, as of yet, that the final bottom has been struck.


Courtesy of ElliottWaveTrader.net

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: [email protected].

China has only 2% of its Total Foreign Reserves in gold.

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