In the words of a December 6 Financial Times:
"Gold has been a conundrum in the past couple of months. Despite the rising sense of alarm in Europe, regular selloffs in the bond market, and relentless headlines about the demise of the single currency, gold -- supposedly a safe-haven against such turmoil -- has been mundanely range bound."
Since then, gold prices have gone from "mundanely range bound" to supremely down, down to a two-month low (and sinking). So, have gold price gone rogue?
Today I'm sitting down with EWI's trader-focused
Metals Specialty Service editor Mike Drakulich to get to the bottom of gold's "conundrum."
Nico Isaac: Have gold prices gone AWOL and defied all sense of order?
Mike Drakulich: Absolutely not. While the fundamental analysts may see no rhyme or reason to gold's decline, the shape and form of gold's selloff falls within the laws of Elliott wave analysis.
Nico: What is the dominant Elliott wave pattern you see unfolding in gold right now?
Mike: The strength and speed of the decline best fit with a likely thrust down out of a large contracting triangle pattern that's been building in gold's charts since late September bottom near 1535. Post-triangle thrusts are very dynamic affairs, and the current gold decline fits in very nicely within those parameters.
Nico: You emphasize the importance of bolstering Elliott arsenal with technical analysis tools. What technical indicators are you watching right now to confirm your overall wave count?
Mike: My usual arsenal: the Relative Strength Index, the 50 and 200-day moving average, and other momentum indicators. So far, they support my Elliott wave assessment that the move is likely not over yet.
Nico: What would be a strong indication that prices have "officially" turned down?
Mike: Well, gold is already trading $350 below its all-time high! The question is, will it rebound from here soon, or continue even lower. Like I said, the Elliott wave pattern of the decline looks incomplete, but I'll be monitoring the situation closely and updating my Metals Specialty Service subscribers as we go along.