The general view on gold remains the same with the uptrend coming to its end and with a deeper correction on the table. Recent developments suggest that this 5th wave up is an ED and it is probable for Gold to make a new high before entering into a deeper correction which initially targets 23.6% retracement of the 2016 rally and lower levels later on. However, recent action has complicated the picture thus in this article will be discussed 2 different scenarios to give insights on what is more probable to happen in the coming days.
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Gold Daily Chart - August 9, 2016
On the bigger picture, this is the last wave up towards possibly a new high before Wave II starts. This 5th wave has the characteristics of an ED thus it is probable that the upward channel is preserved in the days to come. Current levels are very important support (once resistance) thus if gold is to retest its highs, it needs to have a jump above $1360.
Gold 1h Chart - August 9, 2016
The first scenario is that gold has topped and this decline is the start of the highly anticipated wave II. What is not very appealing with this scenario is that the up move was an impulsive one while this decline is corrective so far.
Gold 1h Chart - August 9, 2016
The second scenario is that this decline was just a corrective move of the uptrend. It is highly possible given that the current wave has retraced exactly 61% of the rally but has failed to close below that level. We need to see an immediate recovery, which is most likely due to bottoming tails in the 15 m chart and it would be very preferable a break above $1360 to confirm this bullish scenario.
For the moment we are playing gold on the long side with stop loss at its yesterday's low.