Are You Sure Gold Is A Safe Haven?

I am watching the latest on goings in Greece from deep on the sidelines.  One analyst after another suggests that Greece is on the verge of imploding.  And, we have been warned so many times that such an implosion will have a dire effect upon the Euro, as well as world-wide stock markets.  They are suggesting that people consider some protection for their assets.

So, clearly, all of this makes me scratch my head, as gold has been just meandering in the dumps. Is not gold supposed to serve as the protection from such sovereign events?  Is not gold supposed to serve as protection from stock market crashes?  Where have all the “safe haven” advocates gone?  Why has gold not even been able to catch even a “dead-cat-bounce” bid?

And, ultimately, if all we are seeing are “dead-cat-bounces,” then one cannot view this market in a bullish sense.  Rather, this is a bearish pattern as it currently stands.  The clearest pattern being presented in this sense is seen in the GLD chart.  As long as the GLD remains below the 117.70 premarket high struck on June 18^th, we are set up to see lower lows in this market in the very near term.  The only question I have is whether all of wave ii in wave (3) down has completed, since it would be considered quite shallow if it has.  Ideally, I would rather see an attempt at the market to re-test the 114-114.50 region in a wave ii, but if we should strongly break the 111.65, with follow through below 110.65, then I am looking for the heart of wave iii of (3) down to be in progress, with my next target being the 105 region.  And, again, it would take a move through the 117.70 level to make me reconsider this perspective.

GDX, too, has remained unusually weak during the past week.  I was actually hoping for more of a corrective rally, but its weakness has been similar to the one seen in GLD. With 19.19 being the high seen on June 18^th, that is our high water mark for the bearish case.  As long as we remain below that level, the GDX is set up to target lower lows in the near term.  And, as with the GLD, I would still like to see more of a corrective rally in the GDX, a break down below 17.80 opens the door to us being in the heart of the 3^rd wave down to lower lows sooner than expected.

As for silver, while it is in a clear downtrend, there are several counts which can apply to this downtrend, as I noted last week.  This makes it much less reliable to provide guidance with regard to specific levels of resistance.  But, the clear initial level of resistance is 16.55, and as long as we remain below that level, we are set up to drop to our lower targets.

Now, this brings me to a point I have not made in quite some time.  For several years, we have been focusing on our long term buying targets in the metals.  And, as you know, I have had lower blue boxes on the GLD and silver charts.  So, I think it is time to remind everyone again that my ideal target for the GLD is 98.50, and in silver it is 12.75. 

Ultimately, if one is a longer term investor in this sector, one has to be preparing to make very long term purchases when we enter the target zones.  And, while we still can see extreme extensions which can take the GLD as far down as the 75 region, and silver as far down as the 10/11 region, once we move into our long term target zone, one should be looking to buy, even if lower levels will still be seen.  The lower levels, if seen, are points at which one may consider adding to their positions.  Once the market does begin the final run to lower lows, we can then determine how deep the extensions will take us.  But, you still need to have your plan in place before we drop, as I can assure you it will be an extreme point in price, as well as emotion, within this market.

It is for this reason we are also working on a suggested portfolio of mining stocks (along with a suggested allocation mix), which will be actively managed by myself and 3 of our StockWaves analysts at Elliottwavetrader.net.  Our portfolio is being developed with the intention of outperforming the GDX by pulling out those stocks in the GDX which we view will underperform, as well as adding in other stocks we view as having the ability to outperform. 

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See Avi’s charts illustrating the wave counts on the metals at https://www.elliottwavetrader.net/scharts/Charts-on-GLD-GDX-YI-20150628756.html

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.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.