Almost to a man (or woman), every analyst on the earth is bullish on prospects for Gold. Whether it is the Fear Trade (every kind of problem currently going on in the world) or the Love Trade (festival times since September thru February), whether it is safe haven status or whether it is printing press over activity, the expectations for Gold are that it should move higher.
One is therefore left wondering as to why the metal prices have not really moved. Its been a few months since Gold hit its top and has been into a consolidation type move. The lack of price damage keeps the hopes running. As does perhaps the fact that the metal is still creating some higher bottoms on the charts. Some are making out triangle patterns in a desperate attempt to force the issue of an upside breakout. Others are using the news and fundamental route to tell us that the upside move should soon be happening. Like I said earlier, there is no dearth of positive reasons out there to tell us that prices should go higher. Take a look at the weekly chart.
Prices struggle at retracement resistances. A move below $1681 would resume the decline. The RSI has slipped to taking resistance near 60. The weekly ADX line has turned and is now headed lower. The CCI is not able to achieve any strength. All these indicate a counter under pressure from sellers. From a corrective pattern structure, it only looks like two waves are over with the third, downward leg still in balance. However, looking at the minimal price damage of this overall correction in the context o f the whole rise, it seems more like we would have a triangle type corrective here that will be a part of a continued upward wave. Hence expect some sustained ranged action across several months ahead. Upside breakout in gold should therefore emerge in gold only after many months ahead.
If gold is going to be in a consolidation then what does it hold out for other asset classes? The bottom line is that the money needed to bail out Europe and to fund America’s spiraling debt and future unfunded obligations is in the ten of trillions. IT DOES NOT EXIST. It has to be created by printing money in massive quantities, and despite all the rhetoric you will hear against such policies, in the end it’s the path of least resistance. Typically, we find that all that extra printing of money that is going on in the world will eventually find its way into more risky assets such as stocks and commodities.
But eventually, it will also benefit gold. That is what history has taught us. So it appears that we may see a halt in gold prices for now and riskier assets taking over for a while only to return to gold as value of fiat currency keeps eroding away across the globe.