Gold continues to trade above $1,400 despite recent declines. Is a bearish reversal imminent? The following analysis is based on the Elliott wave theory.
July 26, 2019 | AtoZ Markets - The precious metal spiked to 1433 on Thursday before it dropped quickly to 1411. For over a week, the non-yielding commodity has been trading above 1400. After the massive bullish trend since August 2018 to hit the multi-year high above 1450, it was expected that price would hit the 1500 handle. However, it had a sharp decline which continued yesterday after an upbeat US macro data was released. The US treasury bond yields were lifted yesterday as well after an improved Dollar. The market will now look forward to Friday Advanced US GDP data for more short-term clues. The bears will look forward to dragging the commodity further downwards into 1400 if the data is upbeat.
Gold analysis: important price levels
The major support level remains at the 1400 level. Price is much closer to this handle than 1500. A break below will lead to a retest of the 1375-1368 support zone. To the upside, a break above 1433 intraday resistance will lead to a meeting with the 1440-1455 new resistance zone. Above the resistance zone, the 1500 handle will be the next bullish target.
Gold Elliott wave analysis
Gold bullish trend from 1160 is in the final stages. Price is completing a bullish impulse wave. A 3-wave bearish correction is expected to follow to 1300 or below. Once 1400 is broken downside, 1300 will be the next ultimate bearish target. However, the 5th sub-wave of the 5th wave has not yet completed a clear motive wave - impulse wave or ending diagonal, as expected in the last update where the chart below was used.
While price remains above 1400, it has not advanced as expected. While these scenarios are still valid especially if there is a break above 1450, it's good to look at the downside possibility. Has wave v of 5 ended at 1452? If this is the case, that will be a very stunted 5th wave. The US Advance GDP data will add more clarity. If a better than expected data happens, Gold might fall below 1400 to fulfil the scenario below.
If the 5th wave has completed at 1452 then a fast break below 1400 should happen. The target for this scenario is first at the 1375-1368 support zone and then at 1300. However, if price finds support at 1400, one more leg upside above 1452 could happen to complete an ending diagonal 5th wave instead.