The Price Action In Gold Does Not Make Sense

Is this the start of just a corrective rally in gold, or is this actually a gold break-out? Here are some price levels to be watching to answer that question…

by Avi Gilburt of Elliott Wave Trader

I have been hearing for years how gold is manipulated to go down, and is expected to rise when allowed to trade freely. So, according to these manipulation theorists, gold is really only supposed to move in one direction and would never see any corrections.

Yes, I know that sounds ridiculous, but this is a perspective in the market. And this is why so many were not able to foresee the correction which began in 2011.

And, who do these folks believe is manipulating the market? Well, it’s the commercial traders of course. And, when gold took a $20+ drop pre-market on Monday, again, we heard about how the commercial traders successfully raided the gold market.

But, wait a second. Something does not make sense. According to the Commitment of Traders reports, these commercials are more net long than they have ever been. So, are the manipulators now being manipulated? If so, by whom? Or, have we just seen evidence that suggests that the manipulation theorists have it all wrong?

I am sorry to ask questions that make you think about truths and realities in the market. I take it as my personal responsibility to make you question everything you read or hear, because most of what you read or hear is pure fallacy that has been propagated by analysts and market participants alike.

As far as the SPDR Gold Trust (NYSEARCA:GLD) is concerned, as long as we hold over the 111 level, I am looking for a rally back to the 116.25 region. But, as long as the 116.25-118.25 region holds as resistance, I am viewing this as a corrective rally, which will point us back down as deep as the 105 region, with a minimum target at 109.

The next break of 111 in GLD will likely be pointing to a target of at least 109, with the potential to extend as deep as 105. But, that should be the final decline we see in this complex before a major rally takes hold.

See charts illustrating the wave counts on the GLD as well as GDX, Silver and more.

 Avi Gilburt is a widely followed Elliott Wave technical analyst and founder of ElliottWaveTrader.net, a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.