Back in August 1971, President Nixon shocked the world by taking the dollar off the gold standard. The dollar had been on gold standard since Bretton Woods Agreement of 1944. The biggest bombshell for gold investors in 45 years since Nixon announcement may be ahead. That bombshell is a potential ban on import of gold into India. If this happens, there is a high probability of a one-day drop in gold that could reach $200.
A prerequisite to understanding this potential development is to understand what has happened in India recently. Please carefully read India, not Trump, is the real reason behind the crash in gold prices . Before explaining the enormity of such a ban, let us start by looking at the charts.
The charts
Start out by looking at a chart of gold futures GCZ6 on the election night. The chart shows how Modi selling overcame Trump buying. A subsequent budding rally was killed by a rising dollar.
Please click here for the annotated chart of gold on election night.
Now let us look at the long-term monthly chart of gold using popular gold ETF GLD.
Please click here for the long-term monthly annotated chart of gold.
Please note from the chart that during the 2016 rally, gold did not even reach the 38.2% Fibonacci retracement of the move down from the high of $1904 to the low approaching $1000. This indicates weakness. At this time, the rally of 2016 in gold has to be considered a countertrend rally and not the start of a major new trend to the upside. This conclusion will be invalidated only if gold prices rise and go above the 38.2% Fibonacci level shown on the chart. Similar conclusions after reasonable prudent adjustments can be drawn from charts of silver ETF SLV, gold miner ETF GDX, and junior gold miner ETF GDXJ.…Read more at MarketWatch
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