Gold rallied to 1288 but the bullish momentum has subsided. Will the bearish trend continue to 1260? The following insight is based on the Elliott wave theory.
May 27, 2019 | AtoZ Markets - The yellow metal has gained significantly on the plummeting Dollar as a result of the ongoing US-China trade tension. The rally took off from 1269 last week after the trade war intensified following attacks and counter-attacks from the two parties. With the pessimism that surrounds the global markets, investors once again look toward the safe-haven commodity. It was bid around 1288 last week.
No doubt the USD weakness favours the precious metal. Markets and banks in the US and UK are closed today, therefore, there will be little action. The market will look toward the US GDP data coming on Thursday for short-term sentiments. It's not clear if the trade tension will be resolved anytime soon as the two countries pass the blames to the other. It remains to be seen how long the bid for the dollar-denominated commodity will last. However, from the technical perspective, it seems the non-yielding metal is still under bearish pressure as price seeks to complete a diagonal chart pattern at 1260-1255 critical zone. If the metal drops below the 1280 price level once more, we might see further dips before the next round of rallies.
EURUSD Elliott wave analysis and important price levels
In the previous updates, we saw the formation of a diagonal pattern from 1346. The long term price pattern shows that Gold price is about to complete a triangle pattern which could be the second wave of a 3-wave bullish correction. Price could push further downside toward 1212 or at prices above before returning upside toward 1600. As wave (E) develops, we saw the possibility of completing a diagonal wave A of (E) as the chart below (used in the last update) shows.
Wave (v) of A was expected to have at least a sharp bounce before returning downside as the chart above shows. It seems this is exactly what is playing out as the chart below shows.
The current bounce might not last further if a break below the rising (red) channel happens. If 1260-1255 zone is hit, a big bounce toward the 1300 handle is expected to happen before further crashes. Gold from the technical perspective still remains under the bearish pressure from the short-term and medium-term perspectives unless a fast break above 1346 happens.