Is gold the mother of all hedges ?

Recent years there have been many 'experts' calling the gold as the best hedges against inflation . And they get even more vocal after last year financial fiasco. Basically I think they are making a lot of "if, then...." base on the old school fundamental analysis. But is gold really as bullish as they make out to be ?


First let us take a look at its monthly chart, I notice there is a potential double tops in formation. A double tops is usually an extreme bearish chart pattern, if plays out, may see gold go down at usd400.00. I also notice there is a bearish divergence in formation at the MACD and the D+ (where price reached new highs or same high without similar confirmation at the indicators). Another item to take note would be its ADX which has been stepping downward. All these are potentially extreme bearish.

At the writing, price is breaking below the upper Bollinger Band which is usually taken as an initial sell signal. BUT, as we are still in the middle of the month, the current price bar is NOT "official" yet. We need to wait until the last trading day of this month (30th, Tuesday) to see where it closes.


As for the weekly chart, first I would take note of the falling ADX which is now below 20's which is telling us this market has fallen into a sideway mode. A double tops is here too, so is the bearish divergence. The things to watch out for will be the MACD goes below its zero signal line or price closes below the lower Bollinger Band, especially its recent fractal support of 865.


Then we come to its daily chart for the more immediate buy/sell signals. The daily ADX has also gone below its 20 signal line which is telling us the market may be range bounding before the next course of direction emerges. But you should pay attention to the prices which are now below the lower Bollinger Band which is bearish. Both the MACD and the Stochastic are negative. The MACD is drifting toward its own zero signal line which may trigger new selling. The oversold Stochastic (oversold because the ADX is low, so I will read it as such) may be signaling a temporary bottom is in.

Any closing of above its recent high and its ability to hold above for at a few days may put back the bull talks into this market. But with the bearish divergence at the weekly and monthly charts, even a new high is achieved, I would still remain very cautious about this market. Another word will be the upside may be limited and the downside will be juicy. And to say this market will be 'the king of all hedges' in the current financial turmoil period will be highly uneducated.

At this point, there is also NO major sell signal yet.