Tuesday, Jan 15, 2008
Is this why gold is rising?
The Telegraph: ECB warns crashing dollar may stop Fed cuts
Rumours of an emergency rate cut over coming days by the US Federal Reserve have swept the global markets, setting off a fresh plunge in the dollar.
Gold surged to an all-time high of $914 an ounce in New York on bets that the authorities will flood the global system with further liquidity to stave off a mounting debt crisis.
Posted by sold 2 rent 1 @ 08:40 AM (710 views) Add Comment
13 Comments
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1. sold 2 rent 1 said...
Elliott wave 3 of this gold run is near completion. If the Fed cuts IRs then gold surges to exhaustion level over the next few weeks. If they don't then it may correct to the low 800's much sooner. But don't sell all of your holdings. Elliott wave 5 will surge after the wave 4 correction setting new high after new high.
2. tyrellcorporation said...
The FED doesn't give a stuff about the Dollar - likewise the BoE will sacrifice Sterling to save house prices - a bizarre World eh!?!
3. rickyb said...
Are you saying that we can't predict gold prices using Elliott wave theory until a decision is made by the Fed on IRs? What use is a theory that can't make predictions until the outcome of a future event is known?
4. cornishman said...
I'm still having a problem with this Elliot analysis. I can see that it can predict reaction to a single piece of bad news - price of gold goes up, people jump on bandwagon, price goes up some more, some take profits, price bounces around as per prediction etc. But what if there is just more bad news after more bad news? All the 'waves' will be all jumbled up and any 'prediction' would be worthless.
Talk of wave 4 or wave 5 is all very well - but what if there are 10 pieces of 'bad news'?
5. techieman said...
@Rickyb and @Cornishman - Its really quite difficult to explain. The count allows for amendments to be made as it goes. The useful things about Elliott are :
1. 3rd waves are often the biggest never the smallest,
2. Waves often equal each other. If not the golden ratio can be used.
3. A 5 wave move is never the end of the move
4. waves in the same direction "alternate".
As S2R1 says the interpretation of the theory can differ between analysts and also the moves can be made to "fit". Thats why people give up on it and thats why it works stunningly well sometimes. You need to aquire an Elliott touch. If you order the classic book by Frost and Precther, then you can take a look and make up your own minds.
A case in point is the gold move - there was a well defined 4th wave around Christmas - there was a high PROBABILITY that the 4th wave would be resolved to the upside BUT had the market fallen then the count could have still be a 4th wave because the 4th wave triangle can have a false (in this case downside) breakout before resuming the prior trend. However if the action had created a fall below 750 then the count would have needed to be amended. In short its about probabilities. You trade the high probability trades based on the paterns but nothing is certain. At the moment the high yesterday (to me) looks like a (short term) top with a downturn, but it could be part of an extension up. Also the degree of the downturn requires some work, before i look for taking a bear position.
6. techieman said...
Sorry i need to qualify point 3. An INITIAL 5 wave move is never the end of the move. So if you have a 5 wave counter trend move then this will be followed by a retracement against that counter trend and then another move in that counter trend. Although similarly the initial 5 waves could be a change of trend.
7. Nicholas Parsons said...
MORNINGTON CRESENT!
8. techieman said...
@Cornish - its really not about the news. You are too into the fundamentals! Sure there will be some news events that are totally unexpected but I can honestly say for the most part the news is discounted in the market. If Gold now falls that should be proof enough? For example the point you made was that China were now trading gold. But thats news that was discounted in the market previously. If you like the moves chart the news TRENDS.
@ S2R1 - have you looked at the US Dollar chart v Euros or the US Dollar index?
9. harold said...
"Rumours of an emergency rate cut over coming days by the US Federal Reserve have swept the global markets, setting off a fresh plunge in the dollar"... and, as a result, a rise in gold - for sure. Which makes me think that the FED will actually hold, and gold will correct (short term). Look to see what the US retail sales data and banking results are later on today.
10. sold 2 rent 1 said...
techieman,
I use zealllc.com for subscription charts that track USD index, USD/EUR, Gold, HUI, Oil, and loads others. The key item to watch is how much over/under a price is compared to its 200 dma.
On this basis gold is looking overbought (but could still go higher). HUI still has a decent upward movement before exhaustion. USD index requires a final capitulation to 72 ish before any bull market can begin. EUR/USD needs to go to 1.55 ish to complete it's exhaustion.
In order for gold to go crazy in its wave 5 it needs to correct quite hard/long in wave 4 so that its 200 dma can catch up.
I have a bunch of EURs sitting nervously in an Irish Bank that I will switch to GBP upon exhaustion. Wait a few weeks for gold to correct then into gold.
11. cornishman said...
Hi techieman. I think I'm probably a lost cause!
12. techieman said...
interesting points s2r1. I dont use MACD too much myself, im more into Williams Percent R and RSI. Both are overbought and Williams has some bearish divergence, although RSI hasnt.
Cornish - Dont worry each to their own, Im not trying to convince you to become Elliottised, its just an interesting book!!
13. rocket robbie said...
s2r
Gold has taken a dip the past few days is now the time to sell or do you see it rebouncing in the next few weeks??