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For price discovery mechanisms to do their job, they need the unimpeded interaction of buying and selling forces in order to point true. Like a compass, it is moved by the collective of external influences. However, it could be argued that the gold price is currently only a "good approximation", which is the best you are going to get. More importantly, if gold is, is often described, the “sum of all fears” - what does the current price tell us about epic global events as they unfold ? As such, gold is also a barometer. 

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Like a modern day Cassandra from Greek mythology, who was given the gift of prophecy, but cursed by never being believed, gold analysts and indeed the gold price is itself uttering truths - as indeed are leading economic indicators.

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Love it or hate it … you just cannot ignore gold … it is after all a “bellwether”. Originally a bellwether was a bell tied around the neck of a castrated ram (a wether) who would lead the other sheep and give the shepherd a ready reckoner on the movements of the flock. In financial markets it just refers to a leading indicator. 

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If, as they say, it is darkest just before the dawn, then surely for gold at least, the sun must be cresting the horizon now ?

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It is natural that we measure things by a familiar yardstick - the problem is that being so-biased or lazy, we can be deceived. Take gold.

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There is probably no more irritating an adage than the old Wall Street one which says “no one rings a bell at the bottom or top of a market” … but it does highlight the purpose or value of making a trading call - or if you prefer (as it is the season for it) … in making a forecast. 

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There is a tendency to look at the gold price in US dollar terms simply because that is the currency it nominally trades in within the bullion wholesale market. The bias is reinforced by the headline writers who do likewise… yet meanwhile in other currencies gold has been in a stealth bull market these last 4 years. 

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Virtually every parent will have heard those words from a deeply frustrated small voice in the back of the car … similarly any bullion dealer from investors bemoaning gold’s sideways price action, despite some pretty alarming noises from the news stations.