Don't Argue - GOLD

Sometimes the market looks you in the face and says, "Don't Argue". Such it is with the Elliott Wave count in monthly GOLD futures, below.

From the Fibonacci ratio of (3) = 2.618 x (1), to the exact 50% retrace of wave (4) on wave (3); from the peak of the RSI on wave (3), to the lack of overlap between (4) and (1), to the current monthly divergence of the RSI on wave (5). The market says, "Don't argue". But in addition, we note there IS a kind of alternation in this count. Wave (2) is a "Running Flat" - in which case "running waves" argue for "Great Strength" to follow the wave. There was great strength following that wave (2); a 2.618 wave (3). And, to alternate, wave (4) was a "Regular Flat" - not as much alternation as one would like, but some. From the Fibonacci ruler on the left, price has now touched 1.382 x wave ③ which is a common target for either "B" waves or fifth waves.

Next, when we look at wave (5), we see it did make a higher high. And the "breakout" now has everyone extolling GOLD's virtues. Now? Not in 2016 - a Fibonacci eight years ago - when GOLD bottomed??!!

OK. So, let's do a real time experiment. IF we are in a wave (5), then the three most likely Fibonacci ratios for this wave are a, (5) = (1), b, (5) = 0.618 x [net (1)-to-(3)], and c, (5) = (3). So now let's draw a blank chart of GOLD and see what we get when we add a Fibonacci ruler.

First, the reader should verify that price is already past (5) = (1). Second, the chart above shows the relationship of 0.618 x net [(1)-to-(3)] comes in at 2,263. Meanwhile the price high last week was 2,257. Hmm. That is awfully close. OK. 

The problem for alert readers is this. Although there 'may be' an ending diagonal in formation, there is no proof of a turn yet.  So let's look at a weekly chart in Gold. And now the problem should become a bit more clear.

One could make the case that since wave 3 is at least 0.618 x 1, the diagonal may be ending. Granted. But also, we see that wave 4 was not a clear zigzag. It may have truncated being an omen of strength. OK. But neither does 3 exceed the length of 1, yet. So, keep in mind the measurement - which readers should perform - that, if 5 in the black count exceeds 2,325 then the fifth wave may not be forming a diagonal.

On a fundamental note, we note that GOLD's price has been rising in the face of FED's interest rate hikes. Is that the way it supposed to work? Paying no dividends, GOLD carries storage charges and costs of ownership. The higher interest rates are supposed to dissuade one from owning Gold. Any number of people are now saying that Gold will skyrocket when the FED begins to lower interest rates. Really? Doesn't that fly in the face of what just happened? Word has it that this rise in GOLD has been on the backs of (other) Central Banks themselves buying unprecedented amounts of Gold in order to fight off sanctions from the U.S. and other countries if things should begin to deteriorate. Charts do show that CB's have been heavy purchasers of Gold. Well, that's the story, anyway.

In any case, the patterns are intriguing but one should not argue with the measurements.

Have an excellent rest of the day, and the long weekend.

TraderJoe