The last time we spoke about gold was July 20th, 2015. In “Gold Fulfilling A Year-Old Forecast!”, we suggested the precious metal is probably getting ready for a major bullish reversal in the area around $1100. And indeed, the price of gold rose from $1077 to $1176 so far. But is this 99-dollar recovery the start of a long-lasting bull market? Could it be just another temporary correction of the larger downtrend, which is still in progress? In order to try to find the answer, we will take a look at the weekly chart of gold.
According to this count, for the bulls, sky is the limit. It suggests that the whole corrective decline since the year 2011 is over. If so, the bottom at $1077 should stay untouched from now on. However, there is another possibility, shown on the chart below.
On the first chart, we assumed gold has been developing as a W-X-Y-X-Z double zig-zag. Here, we accept the idea, that the decline from $1921 to $1077 is only a simple W-X-Y zig-zag correction. In this case, wave Y should consist of a smaller a-b-c zig-zag. The problem is, that, if this is the correct count, wave c of Y is incomplete. It appears to be taking the shape of an ending diagonal, whose fifth wave is still missing. This would mean the current 99-dollar recovery is just a fourth wave retracement, preceding wave 5 of “c” of Y to the south. According to this count, gold still has one more bottom left to make, before the bears finally give up. Having in mind the fact, that there is a strong resistance around $1180, this idea definitely deserves your attention.
Both scenarios seem equally probable right now, so there is no point in picking a favorite one. The Elliott Wave Principle‘s job here is to prepare us for each one of them, so we could avoid any unpleasant surprises.