Here is a long term view of this gold bull market back to the major upturn. Note the periodic corrections and consolidations.
Things happen for a reason. The reason there are corrections and consolidations in these long term trends is that there are contrary opinions among traders which engage the push and pull of the market. Also, and importantly, different traders have different positions operating on different timeframes and different agendas.
Within a long term trend there are opportunities to squeeze the shorts and shake out the weak hands on the long side. With 8000 desperate hedge funds out there, and ten or more outsized banks flush with hot money and a shrinking pool of opportunities, we can expect more short term volatility as traders try to set up gambits, squeezes and traps. There is also a bias among the central banks against gold, which is the antithesis of an arbitrary power to determine the value of money. This is at the root of their greatest policy error. For all the reason noted, the bigger players will shove against the price trend when they can, but as is obvious from the chart they cannot resist the pressure of a valid trend indefinitely at least while markets function.
Here is a closer look with a simpler line. Again note the corrections. Charts are not modern art. They are symbolic representations of reality. Of course at some point the long bull trend will end, but until then it will often correct and consolidate. It is our task to try and set some reasonable criteria to see what is happening as closely to when it happens. As the progress of the trend proceeds we buy weakness and sell strength as best we can, managing leverage and our emotions above all.
Here is a look at the same closeup but on a percentage basis. Note the wavering, the push and pull of the bulls and bears, the big trading desks and the small speculators and funds. We have friends and acquaintances who abhor gold, because they think that they have missed the bull trend and wish to see it fail, so that they might be proven 'correct.' The only correct thing to do in trading and investing is to make a profit fairly, with justice.
Here is a closeup view, the daily chart which we post every day. Although we cannot be sure, it does look as though we are closer to the end of this correction than the beginning, and that we are testing some strong support. The dollar is also at a key juncture in its countertrend rally. The FOMC will make their August policy statement next Tuesday 5 August. This will probably be a decisive moment. Gold has strong support at 875 and 860. The dollar has strong support at 68.
We will not be surprised to see gold test the psychological barrier of 900 severely. That does not matter. It does not change the trend. When the market realizes that the test is over and the trend is in control again the move higher may be impressive. This is the same for all bull markets, whether they be gold, oil, swiss francs, euros, silver, whatever. Bear markets have a slightly different character, although the bear market in the dollar is being managed artificially so as to even its decline. Bear markets are normally more violent than bull markets.
Let's see what happens.
