Gold continues to churn in increased volatility

In the Lead: “A Gross error? Time tells”

Monday’s near-$50 losses turned into Tuesday’s near-$40 gains as month-end book-squaring and fund rotation activities continued to churn gold. Thus, the one asset that is supposed to help one get a better night’s sleep is having many actually pacing around wondering what this kind of volatility might ultimately result in. While the yellow metal is seen as currently trading inside of the broad $1700-$1900 price band, the darting back and forth between the $1780-1850 areas has been quite vigorous and indecision patterns have been dominating the action for several trading sessions now.

Spot precious metals dealings opened firmer on Tuesday as the aforementioned departure for other pastures partially turned into a reverse stampede that was good enough to confuse spectating retail investors. Gold was bid at $1,827.80 the ounce and showed a gain of $39.30 on the open. Monday night’s EW short-term update opines that the recent top at $1912.70 (August 22) and the subsequent decline to $1702.70 (just three days later) is shaping a downward reversal pattern that might initially draw bullion to the $1480-$1500 area.

If and when gold were to breach the $1650 support zone, the EW team believes, then the “bearish implications of a complete five-wave rally from the 1999 low is considerable” and that it possibly “portends a correction of that entire advance” in a process that “should unfold over several years.” How many, if any, believe that such a development is possibly in the making is the question of the day/week/month/year. It would be tough to find adherents to that stance at a time when $2500 gold promises/expectations are firmly at the top of the current headlines.

And, EW allows for that turn of events to be pushed back if gold manages to overcome the August 22 high in a renewed upward push by the bulls. But, hey, that’s what a market makes. Hopefully, there is room for disparate opinion. For the moment, some of the gold/silver bulls are presently focused on heavily slamming the CME in various forums as having derailed the never-ending gold rally in a sinister, orchestrated way, with last week’s margin hike (just as it allegedly did with silver back in May).

Silver added 66 cents to start at the $41.54 mark on the bid-side. The white metal seems to have begun its own descending pattern following the August 23 high at $44.28 the ounce (also in the view of EW analysts). The counter-trend bounce back up to the $41.90 level could mark a near-term stopping point and the $36.96 level still remains under scrutiny as the near-term objective for the bears. Vaulting above the aforementioned $44.28 price point would postpone the next selling waves in silver.

Platinum and palladium made sizeable advances this morning as well as traders saw short-term opportunity in the metals’ proximity to the $1,800 and $750 levels and bought fresh positions. The former climbed $18 to open at $1,838 on the bid-side while the latter rose $12 to start at the $764 mark per ounce.

This morning was hardly an exception to this recent “rule” as gold gained ground along with the US dollar (such a tandem rise is lately being dismissed as becoming ‘acceptable’) and despite a near 1% decline in crude (behold the shrinking number or allusions to the gold-oil relationship as well, of late). While US equities climbed higher on Monday as investors gauged the damage caused by Irene to be lower than had been feared (somewhere in the range of $2 to $3 billion), overseas equities presented a mixed bag to investors.

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