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Gold Elliott wave analysis: price descends below 1300, nears two weeks low

Gold Elliott wave analysis: price descends below 1300, nears two weeks low

Gold has broken below 1300 to continue the bearish run from 1346. The following looks at what next based on Elliott wave theory.

March 04, 2019| AtoZ Markets – The dollar-denominated commodity continued the drop from 1346 to hit below 1300 with no signs of recoveries yet. A stronger optimism over a US-China trade deal spurred by Wall Street Journal's Sunday report that the deal could be formally agreed on 27th March has driven prices lower. Investors can now breathe and increase their appetites on riskier instruments thus relieving their hold on the safe-haven commodity. The upsurge in the US treasury yield (which has a strong inverse correlation with Gold) has added to the weakness of the precious metal. There are no strong economic data this week until Friday when the February employment data from the U.S. will be released. The direction of the US Dollar and the broader market sentiment will, therefore, be the major drivers until the NFP on Friday.

Gold Elliott wave analysis and important price levels

Gold has dropped below 1300 to complete close to 5% decline in less than two weeks from 1346. It now trades at 1286 at the time of this report. In the past updates, we have stayed simple in the wave analysis of Gold, looking at the intermediate degree of the bullish trend from 1160. Since the impulse wave rally from 1160, the currency drop, which is over 600 pips is the largest so far. We had expected the 4th wave dip to be limited around 1300 but the price has dipped fast below. We used the chart below in the last update.

Gold Elliott wave analysis

A break below the supply line of the falling channel would show a much deeper 4th wave. In the chart below, we will look at the impulse wave from 1160 to see if the 4th wave is still usable. 

Gold Elliott wave analysis

The 4th wave is getting deeper. The 2nd wave was a little shallow, so the 4th wave depth is good based on the wave 2-4 alternate guideline of Elliott wave theory. The current drop could still make a 3-wave downside to 50% retracement of wave (iii) around 1260 before the bullish trend resumes. The rising trend line could also provide additional support for the commodity as it trends up. The sell-off is fierce, a break below the rising trend line would increase it further below 1240, down to 1200. If the commodity picks up again, buyers would aim for 1360-70.

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