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Will Gold's "Non-Rally" Continue?

For the third time this year, gold prices are trying to break out

by Alexandra Lienhard
Updated: August 18, 2017

Gold started the year strong, but the rally has stalled three separate times: in April, June and again in August. Tom Denham, our Metals Pro Service editor, gives you his thoughts on whether or not gold's latest rally attempt will succeed.

 

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[Editor's note: The text version of the video is below.]

Alexandra Lienhard: Today on ElliottWaveTV, I'm joined by Tom Denham, the editor of Elliott Wave International's Metals Pro Service. Hi, Tom. Thanks for taking a couple of minutes to talk today.

Tom Denham: Hi, Alex. It's always good to talk to you.

AL: Now gold started the year strong, but the rally has stalled three separate times at roughly about the same price levels in April, in June, and now again in August. So what's going on?

TD: Obviously, we've got some resistance there. The curious thing is that level where gold has stalled now three times is very near a resistance line that's drawn from the peak of gold back in 2011 through the peak that formed in the summer of 2016. And prices kept running into that line and stopping. Now, from a technical standpoint, there's such a thing as double bottoms and double tops. But double... triple tops or triple bottoms are not really a thing. And so the great likelihood is that third top that we saw form here in August is not going to last very long, and I expect gold to punch well above the levels that we've seen in these recent months.

AL: And I know something else you also keep a close eye on is the gold and silver ratio. Can you explain why that is, and what this ratio is telling you about the overall trend?

TD: Yes. Well, of course, the gold-silver ratio is a simple tool where we divide the price of gold by silver. And at its basic level, it tells us which market is the strongest, or the opposite, which one is the weakest. And since about July of 2016, gold has been outperforming silver. It's been the strong market.

AL: And, Tom, I thought it would be good to cover one last market. So what about platinum? Is it on the same path as gold and silver?

TD: Well, you know at a large degree, platinum is not at all on the same path as gold and silver. What we've been tracking for gold and silver is a three-wave decline from the peak that formed back in 2011. And gold and silver finished a wave A down and began a wave B up in 2015. But what platinum was doing at that same time was finishing a third wave down and beginning a fourth-wave correction. And at large degree, the peak for platinum wasn't even in 2011. It was back in 2008. And so, only an Elliottician might understand this, but gold and silver is rallying in wave B at primary degree, and platinum is falling in wave C at primary degree. And so we're at a place right now where it looks like platinum may be finishing up its corrective fourth wave and setting up to be weak in a time frame where we're still watching for gold and silver to push meaningfully higher before they begin a long-term decline. So it's there's tension, really, between the juncture we find ourselves in looking at platinum in comparison to gold and silver.

AL: Well, Tom, it sounds like we're in an interesting juncture across the board. Thanks for talking today.

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