This past week has been one of the best for gold, which has followed a strong bullish trend with minor pullbacks. The last update on gold was published 1 week above when it was trading on the $1325 level while we had upper targets.
The general view on gold remains the same, with the uptrend coming to its end and with a deeper correction on the table. However, there is one slight change in this analysis as suggested by the latest rally and break of $1250-$1260 levels.
Gold is entering into a deeper correction which initially targets 23.6% retracement of the 2016 rally and lower levels later on. Initially it seemed to have topped at the violet channel, however new developments indicate that gold might make a slight new high because the 5th wave up is not completed yet.
The last wave up is an ED (3-3-3-3-3), and according to the channeling method it would normally top at the upper bound of the blue channel, however there are two main obstacles that gold needs to pass. Firstly the slowing momentum as indicated by AO and secondly the resistance in the violet channel and previous high.
Gold Daily Chart - August 3, 2016
It is obvious from the chart below that the 5th wave up is an ED as all waves up until now have 3 lower level waves, but the problematic area stands in predicting the price for a top with these kind of waves. In normal conditions, the target would be $1400-$1440 at the upper bound of the channel, however some catalyst is needed right now in an environment of slowing momentum.
Gold 4H Chart - August 3, 2016
On the short term we are playing gold on the short side due to formation of topping tails and failure to breach yesterday's high. However, against-the-trend trade stops are very tight and size is smaller than usual. A pullback down to $1370-$1366 levels would be healthy.
Gold 1H Chart - August 3, 2016