Richard Russell - Gold Action Knocks Out Weak Hands
With gold correcting, in this week’s latest commentaries, the Godfather of newsletter writers Richard Russell stated, “Probably the best picture of gold is seen in the weekly chart (above). I'm using GLD as a proxy for gold. It looks to me as though gold could decline until it has reached the oversold state, hopefully above the rising blue trendline. There were just too many consecutive weeks of rise without a correction. Now we are getting the correction.”



“As for gold, December gold lost 36 points on Tuesday's sell-off. On Wednesday gold recovered just one-quarter of its Tuesday losses, with gold closing near its high for the day. Today, Thursday, gold continues its correction. This is the gut-check which knocks out most of the "Johnny come latelies." Too many advertisements have appeared telling the public how to "solve your retirement problems by buying gold.” When it looks too easy, the market gives you something to calm your enthusiasm.

"No tree grows to the sky." Gold has risen an astounding ten out of the last eleven weeks. Therefore, it's only natural that traders are betting for a correction. For this reason, gold is down almost every night in the after-market as traders ready themselves for the long expected correction -- the correction that never seemed to come.

However, the fact is that gold is heavily overbought and the dollar is extremely oversold. I'm thinking that the resolution of this puzzle could be an extended period of consolidation in gold, in other words, a long sideways movement, preparatory to the next upward leg in gold. Consolidations often start with a sharp break, such as the one we witnessed (Tuesday).”