Gold Elliott wave analysis: imminent bearish breakout to 1250

Gold stays silent ahead of the completion of the US-China 2-days trade talks. The following share insights based on Elliott wave theory.

May 10, 2019 | AtoZ Markets – The US-China trade deal has been the major risk concern this week. The lack of high impact data on Thursday has seen the commodity lacking strong movement. More significant is the ongoing trade negotiations between the US and China. The metal gained just $7 on Thursday, went sideways afterwards and unable to break above the daily high of 1288. 

Meanwhile, after the meeting on Thursday, several news outlets reported that the talks had little progress. The two parties failed to reach an agreement. The U.S tariff hike on Chinese goods, therefore, took effect. The talks continue today and headlines could cause spiky moves. If the deal totally breaks down, the market will have to look forward to how China will retaliate. Meanwhile, the U.S inflation report for April came lower than expected and the USD tanked across the board. Gold price quickly rallied to retest 1288 high. It remains to be seen whether the rally will be sustained toward 1291 high or price will drop back into the sideways range or even tank below 1280 handle.

Gold Elliott wave analysis and important price levels

In the past updates, we have been looking at two scenarios. A big corrective zigzag pattern from 1346 was identified and its last leg about to complete an ending diagonal pattern. The diagonal was expected to continue to 1250 as the chart below shows.

In the last update, a reversal head and shoulder price pattern was spotted with a neckline just below 1279. A break below was expected to trigger a fast fall toward 1250 to complete the ending diagonal 5th wave (circled). However, there was no breakout but price currently still stays below 1291 wave iv (circled) top.

The head and shoulder pattern is not yet invalidated neither is it confirmed. The current move to 1288 could be part of the second shoulder. Unless a fast break above 1291 happens, the bearish possibility exists. A break below 1279 will confirm the head and shoulder formation and possibly start the 5th leg of the ending diagonal pattern to 1250 or below.


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