More than two weeks ago, on November 6th, we published an article, called “Gold With More Than One Option”. In this material we gave you two alternative counts of gold, both of which suggested for a corrective recovery. The only difference between the two scenarios was in the depth of the anticipated retracement.
Here we will focus on the alternative with the more shallow rally. The chart below will show you our forecast the way it was published:
If you have been observing the price of gold, you probably know that it formed a bottom slightly below $1132. Friday the precious metal closed above the $1200 mark. According to the above-shown chart, this 70-dollar rise is supposed to be wave “b” of “y” of “Z”. Let’s take a look at the updated chart:
Since everything seems to be going according to plan so far, it looks like we should prepare for another decline in wave “c” of “y” of “Z”, right? Truth is we cannot make such a conclusion judging only by this chart.
From this distant perspective, gold prices could always continue higher. That is why, in order to support the validity of this count, we have to go deeper into the wave structure. The chart below will give you a closer look into the price action in the black rectangle.
As visible, the decline from $1255 to $1132 can easily be counted as a five-wave impulse. But the important thing is the structure of the recovery that followed. It fits into the description of an a-b-c simple zig-zag correction with an ending diagonal in wave “c”.
Furthermore, note how prices began slowing down when approaching the 61.8% Fibonacci level. If this is the correct count, gold should make another swing high to finish the diagonal, probably around $1210. Then we should expect the resumption of the larger downtrend, which could lead the yellow metal to our big picture target of $1100.