Jim Rogers not buying gold - should you? here are key levels we're watching for gold's pullback

Jim Rogers being interviewed on Bloomberg tv this evening gave his usual discussions about why he's interested in Asia and agricultural commodities (and if we're indeed seeing an intermediate low in the Kondratieff commodities cycle then he could be right on that). Then he was asked whether he'd prefer to buy gold, or oil, to hold for the rest of 2009. His answer was oil (though qualified by some additional discussion of other commodities). As to gold, he specifically mentioned that the International Monetary Fund (IMF) is looking to sell more gold. So he doesn't see that gold can be expected to do well, with the headwind of gold sales by the IMF.

We've been outlining a potentially bearish Elliott Wave alternative that I've indicated on the first chart below (which I prepared for this post). This is an alternative to the view which I'd see as a primary count, as outlined by Tony Caldaro with his Objective Elliott Wave (his site in the "other sites of interest" at the right side of the page here, if you want to look that up). Briefly, that primary view is that gold is simply pulling back into a second wave down, perhaps to 850, 844-846, or maybe even a bit lower - before it pushes up to much higher levels in a third wave up. But the more bearish view could see gold pushing under the 681 level to complete a complex correction first.

Below the first chart is one of my long-standing gold charts that also has markings we've been using for many weeks. These markings will also serve as a guide to clue us in whether gold's pullback is just temporary, or will transmogrify into something more bearish. Another consideration is that we're also focusing on late May as a potential turning time frame for both gold and the dollar. In this case, it will be ideal for the pattern we're seeing, if the dollar tops out in late May with gold reaching a pullback low at the same time. If it happens, it could be a great setup for the dollar to fall again while gold vaults to impressively higher levels. Of course, even in this scenario, Jim Rogers might still be right - if gold's pullback is deep enough, then whatever rally levels it reaches by the end of 2009 might not be greatly higher than where it is now. But it will be enough for many traders if gold can make a smart rally off its pullback low, whenever the precious metal confirms it. (For example, in a wave 3 up the indicators will look much better than the anemia shown on these charts!) We just hope that gold bugs can be patient enough to allow for the possibility of the more bearish potential if gold loses support at the key levels in the charts.

Some additional reading on this topic: Richard Russell (Dow Theory Letters): What are the markets trying to do?, and David Fuller (Fullermoney): Gold is in awkward phase (both at GreenLightAdvisor Views, 4/12/09).