Gold Elliott wave analysis: price looks overbought below 1312

After dropping to 1303, Gold stabilizes just below 1310. The following analysis looks at the technical bias of this commodity based on Elliott wave theory.

March 22, 2019. AtoZ Markets – Gold’s bearish pattern was altered on Wednesday following Fed’s decision to cut their rates forecast for 2019. This means that the world’s most powerful Central Bank downgraded its view of the US economy and decided to hike rates this year against what was expected. Though the Fed’s chair believed the economy is good but rates hike is not needed at least this year. 

Prior to this event, Gold which is heavily denominated by the Dollar, was rallying from 1292 and finding 1311 resistance hard to bridge. It eventually dropped to 1300-1302 support zone. Price was in the 1302-1325 bearish zone. The shock Fed’s decision saw the Dollar tanked across the board and Gold quickly rallied to 1320. Price didn’s stay long at 1320 before it dropped to 1303. The bears are still around and besides 1320 is still in the bearish zone. 

Price is making a slight bounce from 1303 to 1312 and unless 1320-1325 is broken upside, the bears still have a good chance to push this downside. Is Gold overbought? Will it return below 1280 to the bearish target at 1260? 

Gold Elliott wave analysis

In the past updates, we have looked at the wave development from 1160 in 2018. Price is emerging into an impulse wave after completing a long term correction at 1160. The long term bias is to the upside with the first target is at 1360-70. However, the impulse wave is completing the 4th wave which is the dip happening from 1346. The chart below shows the second leg (wave b) of the 4th wave developing.

Wave b completed a double zigzag pattern at 1320 before the price dropped to 1303. A break below 1303 after the ongoing bounce will trigger a new 5-wave wave c of the 4th wave. A dip to 1260 will happen if this wave forecast captures price behaviour correctly. Gold could be at an overbought zone below 1320-1325 and a fast dip should follow afterwards. However, if the current rally (wave 2, circled) proceeds above 1320, the price could go further to test 1325 and a new outlook will be necessary. 

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