Our preferred Elliott wave scenario for Gold for the last couple of weeks was that a long-term wave 4 triangle was unfolding and we recently completed wave E at $1,346 and a new downward move has started that would bring price towards $1,000. Recent price action has put this wave scenario into question because the recent rise from the low at $1,287.50 to $1,312 was impulsive while the decline from $1,346 is currently a three wave pattern.
From the Elliott wave theory perspective, Gold price needs to break below $1,287 and not above $1,312 in order for our bearish scenario to continue to be my favorite. Breaking below $1,287.50 will bring in more selling pressures and will put the long-term support at $1,240-$1,260 to the test. In order to confirm wave E top was at $1,346, we need to see impulsive waves down from that area that will eventually push price below $1,240.
Short-term resistance is found at $1,312. If this resistance is broken, there is increased chance of moving above $1,326 and towards $1,350-60. If however support at $1,287.50 is broken, then I expect a sell off towards $1,250-40. Breaking below $1,240 will confirm my bearish scenario that wave E top is at $1,346. This triangle wave 4 scenario is canceled if price moves above $1,391.
Disclosure: None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions.