What we need to see near term on this crossroad then is a clear cut rally over the 1424 area, which now is a 61.8% upwards retracement of the drop from 1474-1344. Clearing that hurdle would indicate that the rally from the 1344 lows is more than just a counter-trend rally.
Clues for the “C” wave include the Goldman Sachs quasi-bearish 2013 gold forecast that came out Wednesday. In addition, the media attempting to explain the drop in gold as being related to stronger than expected economic indicators or fiscal cliff negotiations.
In order to work off the bullish sentiment that was at parabolic extremes, gold is required to spend a reasonable amount of time in relation to the prior 34-month move to wash out the sentiment and create a strong pivot bottom.
The threat of debt repudiation resonates throughout Europe and has major headwinds for the banking industries and otherwise. And it may be hard for the US market to gain much traction until we find out if there are any resolutions near term.
Many forecasters are now getting very bullish, but I continue to see divergences with The Elliott Wave counts and other indicators that are giving me some short term concerns, and then we can determine if these are long term issues still for the markets.
Recently we have seen a series of three higher lows including Thursday where a lower gap filled in and then gold reversed upwards. What gold needs to do in terms of this GLD ETF is clear the 158 hurdle on a closing basis to set up a stage for a new advance.
Crowd behavior is crucial to the next coming movement in gold and it could be a sharp rally that catches many off guard, much like the downdraft last fall did the same to the bulls. Be prepared to go long gold once over $1,630 per ounce and buy dips along the way.