With today being the 9th day since gold began its descent from 1635.4 it would seem reasonable to assume the sky is falling and gloom is directly ahead for gold bugs. But hold that thought while I show you a couple of rather puzzling surprises about gold's recent price movement.
First off, I offer this daily chart spanning 2007 - 2012 of the Gold Futures (/GC). I have identified the various B and D-wave bottoms and C-wave tops within this time period. The chart also features that new indicator I created recently but have not properly named - so for now it is 'NewStudy14'.
I tend to think of this indicator as measuring buying pressure. The 3 lines one sees in the indicator panel are moving averages of its data - 10, 20 and 50. Generally, when the indicator lines are above ZERO, they are colored blue and price is usually rising, and magenta/red when below ZERO and price is usually falling.
Click on any chart to ENLARGE
Now let's zoom in on the previous B-wave bottom that began in April 2009.
What I have done on this chart is simply measure the slope of price movement out of the 2009 B-wave bottom, which came out to 70 cents per day. It turns out that this very slope defined the slope of the entire 2.5 year C-wave that topped last September 2011.
I also noted that the indicator is generally above ZERO when price was rising and magenta/red when price was falling.
Reflecting back to the Joe Granville days in the late '70s we were told that volume precedes price. And to explore this alleged 'truth' I have concocted so many money flow, volume indicators in so many variations I have simply lost count of them all. But I have wanted to see if volume does indeed precede price for myself. At this point, the best I can say is 'sometimes it does, and sometimes it does not'.
So now let's look at today's gold chart and see what we can make of the pair of puzzling surprises.