Based on the pattern development over the past several hours, we are turning near-term bearish gold in anticipation of continued selling pressure. A sell off to below $1011.30 will confirm that Primary wave C (circle) is underway, with the downside target still “below $680.” If prices rise above $1060.47 at any time, it will likely mean that wave v (circle) up to a new recovery high was underway, with a potential target of $1083-$1093."

Next up, a fund guy. Not a gold fund guy. And more math. As well as a bit of statistics. Written before the Monday events. Seen on Bloomberg:

"Gold’s record-setting rally “appears stretched” and investors shouldn’t count on a falling dollar to sustain the surge, according to Brian G. Belski, Oppenheimer & Co.’s chief investment strategist. While gold has risen as the dollar has dropped this year, the link “is being driven by momentum as opposed to traditional investment dynamics,” Belski wrote today in a report. The ties between price moves in the metal and the currency have been relatively weak since 1970, he added.

The CHART OF THE DAY tracks the price of gold for immediate delivery and the Dollar Index, a gauge of the currency’s value against the euro, yen, pound, Swiss franc, Swedish krona and Canadian dollar. Belski calculated that gold and the dollar had a correlation of minus 0.2 in the past four decades. If the two were polar opposites, then the so-called correlation coefficient would approach minus one. It would be one if they moved in lockstep.

Gold did especially well when the dollar was also gaining, the report said. The metal’s price rose at a 41 percent annual rate on average in the first two years after the currency hit bottom. The average gain for the entire period was just 8.8 percent. “A speculative bubble” may be developing, Belski wrote. Consumer demand for gold has tumbled and mine production is little changed, and these trends don’t “appear to support current price levels,” he added."

In the minutes following yesterday's closings, Mark Hulbert chimed in, over at Marketwatch. He watched the market. He wrote:
"The yellow metal's drop Monday was not as big a surprise as it might otherwise have appeared to be. That's because gold timers, after several months of skepticism that formed a wall of worry for gold's bull market to climb, earlier this month decided on balance to jump on the bullish bandwagon. This meant that, from the viewpoint of contrarian analysis, gold no longer had strong sentiment winds blowing in its sails.

Indeed, the October issue of the Hulbert Financial Digest emailed to subscribers on Oct, 15, argued that "at least from a contrarian point of view, the easiest money in gold's rally is now behind us." Ominously, gold timers on average are no less bullish today than they were in mid-October, despite the recent hiccups. The average recommended gold-market exposure among a subset of short-term, gold-timing advisers currently stands at 53.8%, unchanged from where it was on Oct. 15.

That exposure level is right in line with where gold exposure stood on each of the previous occasions over the last two years in which gold's rally failed. All this suggests to contrarians that gold still has some downside work to do before enough skepticism returns to provide a strong sentiment foundation for a resumption of gold's uptrend."

And, finally, the words of a mining company top banana or two. You can almost feel the excitement building. If these are miners, they must be making those Ned Schmidt projections based on arms, legs and toes. Not these ones. Wonder why. Something called fundamentals, as opposed to fund- a -mentals...
Mining Weekly has them opining that:

"The recent gold price spike, which had seen gold trading at above $1 000/oz, was unlikely to be sustainable in the long run, as this had largely been driven by short-term factors, Harmony Gold chairperson Patrice Motsepe said in the group’s 2009 annual report, which was released on Monday. The gold price had reached a record above $1 070/oz in the middle of October.

Harmony CEO Graham Briggs added that the gold price, in rand and in dollar terms, had been on a rollercoaster, with the prices not moving in unison. He told shareholders that the rand strength had seen the rand gold price decline to R231 000/kg in the past five months of the year ended June 30, 2009, down from R320 000/kg before. In the medium- to long term, Harmony is using a gold price of $750/oz and R225 000/kg for planning purposes. Motsepe said he expected the rand’s volatility to continue." The gents in question still see a chance for gold to be pushed up to $1100 in the near-term, but...

Back to the screens. US data still to come. Volatility still to come. Nerves starting to show. Until later,

Jon Nadler is Senior Analyst, Kitco Metals Inc.

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