Gold price continues its recovery to 1290 and therefore completes a bullish reversal pattern. The following insight is based on Elliott wave theory
May 08, 2019 | AtoZ Markets – On Wednesday, the XAUUSD has surged from 1286 to 1290 ahead of the North American opening. At the current level, the pair has hit its highest price since mid-April. The risk concern over the US-China trade dispute has once again triggered more demands for the yellow metal. The market sentiments remain to the upside as investors will lock their options on safe havens instruments until the trade war settles.
Latest reports from the US Presidents Trump has raised suspicions. He tweeted to increase trade tariffs on Chinese products in the US. Talks are expected to continue in the coming days. However, China is reportedly unwilling to fulfil its previous commitments in the trade deal and the saga is expected to linger.
Meanwhile, Gold price is about to complete a reversal chart pattern after rallying to 1290 from 1266 in May. A double bottom pattern is a traditional pattern that often signals an impending strength. Price is currently at the neckline. It remains to be seen whether a big surge will follow. Lack of data releases from the US today might lead to some quiet moments before an upsurge above 1300 happens
Gold Elliott wave analysis and important price levels
XAUUSD chart prints a 4th wave dip of the impulse wave rally from 1160. The impulse wave started in August 2018. The 4th wave dip has probably ended at 1266 with a zigzag pattern. Wave (c) of the zigzag was expected to complete an ending diagonal pattern. The last leg of the diagonal was shallow and truncated. In the last update, we looked at two high likely scenarios. Let’s focus on the 2nd scenario (whose chart is shown below) which is playing out currently.
For this scenario to play out, a break above and the upper channel line is required. Meanwhile, a double bottom is also ending with the neckline at 1289-1290. If the current surge is sustained, we will count an impulse wave from 1266 as the chart below suggests.
The chart above shows an advancing impulse wave from 1266. The price should break above the channel and extend further to complete the 5th wave extension at 1300 or its neighbourhood. A 3-wave dip could then follow and big upsurge thereafter. If the price stays within the channel, the other scenario is not yet invalid and the price could drop further beneath 1266.