Gold Elliott wave analysis: price drops from 1550

Gold retreats from 1550 after fresh trade war uncertainties scare investors. The following technical analysis is based on the Elliott wave theory.

August 26, 2019 | AtoZ Markets – The yellow metal spiked to 1550 on Friday after fresh trade war was triggered by China. Since the commodity broke above the 1345 resistance in mid-June, this is the 4th new high reached. However, this week started with price retreating to 1530 – below the 1535 previous high.

The metal has benefitted from the intense US-China trade war. It’s currently trading at its six-year high. Last week, President Trump tweeted that negotiations with china have resumed after postponing decisions to add more tariffs until December.  The market became stable. Gold price steadied and became more narrow after spending over a week in a sideways range. However, recently, China announced new tariffs on $75 billion of American goods entering its shores, including Crude Oil. The US President responded with threatening tweets which include telling US companies to leave China and also plans to announce new tariffs and levies on Chinese goods in the US. The market reacted swiftly. The US Treasury yields dropped and therefore Gold quickly broke out of the range to hit a fresh high at 1550.

The risk sentiment has worsened and that might give Gold, a safe-haven commodity, more buying power. Price still hangs between 1500 and 1600 albeit is getting closer to the 1500 handle. Price is currently retreating below the 1535 resistance-turned-support level. If it drops deeper, we might see a hit of the 1480 support level especially if 1500 gives way. If price, however, finds a way to settle above the 1500 handle, we might see further rallies to the 1600 psychological level. 

Gold Elliott wave analysis

From the Elliott wave perspective, we expected the multi-year rally to halt at the 1500-1550 resistance zone. Price hit the top of the zone on Friday but lacked the momentum to push higher. Sellers might look for bearish signals as a 3-wave bearish correction might continue to 1400. However, with the US-China trade conflicts leading the headlines, the fundamentals are not looking bearish at the moment. The chart below was used in the last update.

The new chart below shows a bullish breakout to 1550 as expected.

The Elliott wave pattern is complete and price responded with nearly 300 pips dip. However, more patience is required to see how events unfold at this price zone. A clear bearish corrective pattern should favor the bear. In any way, if the price dips below 1500, it might slip further to 1400 or below.


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