The Gold price has hit a major resistance zone after climbing to its highest price in almost a month. The following Gold Elliott wave analysis looks at what could happen next.
December 04, 2019 | AtoZ Markets – The ongoing geopolitical tensions seem to have worsened and the yellow metal is banking on that. The precious commodity made its biggest weekly and single-day gain since late October. In November so far, it has gained nearly 1.7%. However, the market is testing a resistance zone at 1480-1485. If geopolitical uncertainties persist, we should see more demand in the non-yielding metal. Gold should then continue the recovery above 1485 toward the 1500 psychological level. So far, the commodity has gained over 15% in 2019 YTD.
Trade concerns drive risk-off mood
The latest highlights coming from the US-China trade conflict weighs heavily on the current risk scenario. The market is generally risk-aversive. The case was worsened by the latest developments on Tuesday. The two nations were at the verge of a successful deal a week ago. However, the Hong Kong bill approved by President Trump seems to have caused a major setback. On Tuesday, Bloomberg reported that the US legislature has now ”overwhelmingly approved legislation that would impose sanction on Chinese officials over human rights abuses against Muslim minorities”. Meanwhile, China has threatened to retaliate. The trade deal could then drag on until after the 2020 elections according to President Trump. However, on the newly-surfaced trade war with France and the EU, he was less pessimistic.
The effect of these is sending the stock markets downside since last week. After dropping to 1450 last week, the Gold price has recovered by about 300 pips as it enters into the 1480-1485 resistance zone. Traders will have to watch the market reaction at the zone and the new developments in the second half of the week. Headlines can change quickly.
Gold Elliott wave analysis
Technically, the Gold price is close to making a complete reversal to continue the long-term bullish trend. The bearish correction from 1557 is completing the 4th wave of the impulse wave rally. In the past weeks, we have weighed on how deep the correction could go. However, with the current market structure, we could see the price is still in the bearish territory and could be followed by one more last dip below 1445 unless a fast surge above 1500 happens. If the current geopolitical tensions worsen, the latter scenario is more likely. In the last update, we used the chart below (Charting tools are from TradingView)
The price broke above 1467 neckline of the ‘W’ reversal pattern to hit 1480-1485 as we expected. The new chart below shows the current price reaction around the resistance zone.
The recovery from 1445 looks corrective. Fresh selling pressure could emerge at around the current zone. However, speculative sellers will have to be careful, wait for a significant fundamental trigger and allow the market to make a significant move first. Otherwise, the current fundamental scenario could cause a fast breakout toward the 1500 handle.