On March 12th we warned you that gold could slow down. We thought so, because on the chart of gold we were already able to see three completed waves, so it was time either for the end of the whole move, or at least for a pullback in wave 4. In both scenarios a decline was to come. As you can see on the chart below, count #1 is currently materializing with gold dropping by more than 100$ from 1392 to 1291 now.
Why were we expecting a reversal in gold? Because we saw a triangle and we know that, according to the Elliott Wave Principle, triangles precede the last move of the sequence. On the chart of gold the triangle is in wave 4 of C. The last move of the sequence is wave 5 of C. That is why expecting a decline in gold was quite normal, despite its strong two and a half months rally. It was this same strength that convinced many fundamental analysts that gold is finally recovering for good. But we would like to remind you that when the yellow metal formed a bottom on December 31st 2013, those same experts said it will fall below 1000$ during the first two months of 2014. However, regardless of mass opinions, our analysis was pointing up for gold back then. In conclusion, fundamental analysts, who’s forecasts are based on economic factors, tend to be extremely bearish at bottoms and extremely bullish at tops. And the reason for this is in the lagging nature of the economy in respect to the market. When the fundamentals reach us, on the market is already time for a reversal. Charts are the first to absorb and show market participant’s opinions and expectations. That is why we are looking at them, instead of economic reports or events.