By Avi Gilburt
In 3rd grade, my teacher had a sign up at the front of the class which read: PUT BRAIN IN GEAR BEFORE ENGAGING MOUTH
This made an impression upon me as a 3rd grader. Yet, many adults have yet to learn this lesson.
It seems that every single analyst that you read regarding the gold market parrots the exact same thesis: If the dollar rises gold falls, and if the dollar falls gold rises. This is the first point in which these analysts have not put their brains in gear before engaging their mouth.
Please take a moment and go look at the US dollar chart since the fall of 2018. Then go take a look at the gold chart since the fall of 2018. What do you see?
Now, clear your eyes and look again. Can it be possible? Can you believe your lying eyes?
Yes, my friends. Both gold and the dollar have been in an uptrend since the fall of 2018 despite all the noise you hear that this is simply not possible. But, how dare you think for yourself and ignore what everyone “knows” is true about the metals complex?
Yet, if you read almost any metals article, they will tell you the exact opposite of what your lying eyes are telling you.
So, let’s move on. The next point we hear about incessantly is that gold is a safe haven from equity market volatility. So, I want you to go take a look at the S&P500 and compare it to the gold chart for the months of June and July when gold was moving up very strongly.
Have we now moved into the twilight zone? This simply cannot be. How can the dollar, gold, and the equity market all have been moving up together? But, we are told that gold is a safe haven for equity market volatility and moves opposite to the US dollar!? What is even more amazing is that gold has been rallying strongly even when the equity market was rallying to new all-time highs. Did investors need a safe haven from all-time highs?
I am sorry for making you swallow the red pill, but reality can sometimes sting. Now, the question is how many of you are going to put your heads back into the matrix?
So, in my last article about the GLD, I noted that I was looking for a very strong initial rally to the 138 region. And, we have struck that already. At this point in time, as long as we now hold over the 138 region, I am looking for further extension to at least the 144 region before we see the next larger pullback/consolidation. In fact, I outlined a gap up set up to the members of ElliottWaveTrader this afternoon, as I am writing this article.
As I am writing this, someone reminded me of an interview I did for an article for KITCO which noted our expectation for a major bottoming in the gold market back in July of 2018.
That seems to have worked out quite well thus far.
So, as long as the market continues to hold its supports in each consolidation phase we track (which we will continually update to our members), it keeps us on track in the new bull market. Should a support break, and depending on how it breaks, it could still open a bearish door. We will cross that bridge if we come to it. But, that is why risk management and stops are so important.
Avi Gilburt is a widely followed Elliott Wave analyst and founder of ElliottWaveTrader.net, a live trading room featuring his analysis on the S&P 500, precious metals, oil & USD, plus a team of analysts covering a range of other markets. He recently founded FATRADER.com, a live forum featuring some of the top fundamental analysts online today to showcase research and elevate discussion for traders & investors interested in fundamental rather than technical analysis.