Fool's Gold

THE STORY OF HOW GOLD FOOLED RECESSION. DID IT?
We are not in times of mess. We are in times of unprecedented mess. Not because people have lost a lot of money, but because a loss is messy, loss of jobs, loss of a house, loss of a client, loss of purchasing parity, loss of belief and confidence. We also lost benchmarks about what market acumen really means. Is it about J P Morgan’s quantitative skills costing taxpayers millions of dollars or about Northern Rock, which went bust? We are just witnessing economics the way Elliott once said, “Laws of economics are as they should be, ruthless”.
And if you think flunking finance will teach us, you are mistaken, the fool’s gold is a mirage which will continue to occur with cyclical precisions, just a few learn, rest perish. Abraham Lincoln said, “you can fool some people most of the time, all the people some time, but you cannot fool all the people all the time.” Markets will thrive till it can fool all the people some time. Markets have to live you see, so it will keep fooling a few of us all the time. We at Orpheus know that the challenge is to be fooled less, as it’s the human destiny to be fooled sometime, as you can not fool the market anytime.
What Gold is doing now, seems another mirage that could surprise us in the short term, say more than a few months. A few weeks are enough for markets to destroy 80% of the wealth. It took three years to destroy 70 years of wealth creation from 1857-1929. But what we are talking here is about Recession. How Gold’s rise is connected to the destruction of paper money and everything non-tangible, be it stocks or CDO’s and swap options. Gold’s rise and dollar’s fall started taking a universal truth status. And when a thought reaches epic proportions on mass psychology, market twists the axiom. So if Gold is going up because of a crisis, a fall here on Gold should end the same crisis. No?
The Gold-Silver ratio, we highlighted last time (The Metals Maze) gave no signal of a collapse. Rather the sentiment indicator has moved unfazed despite millions going homeless and more than 100,000 losing their financial jobs (more serious than the tech bust). This means two things, one that the Gold-Silver ratio has stopped working after predicting the 1980s and 2000s crash or second the crisis has not yet started. So if the crisis has not started, we might have a respite coming before the real mess starts. We at Orpheus at this stage don’t know what real crisis the indicator is suggesting, but it definitely seems more than just linked to Gold and dollar.
We kept track on Gold, publishing short term updates. However, it’s been exactly a year since we published an exhaustive Elliott counts on GOLD. WAVES.GOLD published on gold on April 21, 2007, made a few projections. One of them was that above dollar 690, it’s 1000. We have juxtaposed the cases from the old report with the new ones before making projections ahead in time. We have also updated the channeling system, which we explained last time when we talked about CHANNEL psychology when we talked about Jesse Livermore.
‘Anticipated’ and ‘Happened’ cases have stopped surprising us and fractal watching is slowly and surely increasing. Somebody asked us at a recent conference on Elliott Waves. What if Elliott and fractal watching become popular. Will it stop working? Well on the upfront this gave us some joy, as the question regarding Elliott’s wave performance assumed that it worked. About the other part, whether it will stop working, the answer was simple. We humans are so focused on short-termism than long-term asset watch, long-term investments are left to gurus like WARREN BUFFET. Well, Buffet went over 3 decades, but the long-term we are talking about is more than a few months, maybe more than a year. Wars and battles for profits are short term in nature that is why even if the number of Elliotticians increases globally, it’s only the short term counts that may get more chaotic and confusing. On the longer term, there are always opportunities few look at.
Coming back to Gold, now that prices have hit the anticipated targets, we are on another alert now. Is it over for the Gold rush for a few weeks, or is Gold ready to fall for a few months, till where? And if it’s indeed over that’s bad time for Recession watchers. Falling Gold prices mean, dollar strengthening and dollar strengthening means new high on DOW. This might confound many and common sense might catch up finally that if US markets are rising why BRAZIL, RUSSIA, INDIA, CHINA and ROMANIA should keep falling.
According to the TIME and PRICE symmetry, it seems Gold has topped and is ready to come down back to dollar 800 levels and potentially lower sub 800. The funny part is that if we indeed are on the smart side, new highs on DOW will have new excitement linked with it, new patriots, new bloggers, new fool’s looking for the new gold.