Gold Elliott wave analysis: bearish breakout eyes 1260

Gold dropped below 1280 support to create room for more sell-offs. The following share insights based on Elliott wave theory.

April 17, 2019. AtoZ Markets – The yellow commodity finally broke below 1280 after twice failing to do so. The current drop has seen the metal dropped to its lowest price in 2019. The US dollar rallied across the board following bullish Treasury yields and better US earnings reports. The last low was at 1275 but the current dip has pushed the non-yielding commodity to 1273 on Tuesday which has probably opened the way for a smooth journey to 1260 and 1250.

After making a new low on Tuesday, prices have looked a bit upbeat. A rally to retest 1280 was resisted at 1279 before the price dropped to 1274 and currently exchanges for 1276. However, 1273 needs to be taken out for the bearish run to continue to the next support zone at 1250-1260.

Gold Elliott wave analysis and important price levels

Since late February, there was a big possibility that Gold would drop in a 3-wave corrective move. This was supposed to be the 4th wave of a bullish impulse wave from 1160. However, the dip that followed to 1275 in early March didn’t look corrective. This suggested that the corrective dip would be deep and take more time than first anticipated. The bearish correction is now taking close to two months.

In yesterday’s update, we looked at the possibility of the wave (c) of the bearish correction to end with an ending diagonal as the chart below shows.

At this point, price was still about 40 pips above 1280. We expected a sort of support at 1275 leading to a little bounce and followed by another bearish run to 1260. Gold has dropped nearly 500 pips since the bearish correction started at 1346. What next?

We will still keep the diagonal though it’s currently premature. A diagonal is more likely than an impulse wave if the dip from 1346 is corrective. However, we will still keep an impulse wave option from 1325 open.

If an ending diagonal completes at 1250-60, a big surge is expected to follow up to 1400 in the coming weeks or months.

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