Gold broke southwards on Tuesday before a minor recovery to 1280. Will the bearish move continue? The following insight is based on the Elliott wave theory.
May 29, 2019 | AtoZ Markets – After a fast rally to 1288 which saw the yellow metal added $18 last week, price returned downside to 1275 on Tuesday. Currently, the commodity is retracing but the bearish pressure seems not to have given up yet. The USD started this week upbeat, taking off the safe-haven benefits from the precious metal. The US-China trade war still remains a major risk concern.
XAUUSD price started upside on Wednesday, from 1279 to Asia session’s high of 1282. Currently, at $1281 price is around a strong resistance zone. If the bears win again, the price could drop further toward 1260-1255 for the rest of this week. From the technical perspective, the medium-term bias remains bearish.
Gold Elliott wave analysis and important price levels
From the perspectives of Elliott wave theory, Gold is completing a diagonal pattern from 1346 – a leading diagonal is suspected. The diagonal pattern is expected to be the first leg of a larger degree corrective pattern. Gold could be under severe bearish pressure to 1210 before it sparks upside. In the last update, the chart below was used to weigh up the prospective diagonal pattern.
Wave (v) of the diagonal was expected to break below the minor rising channel (in red) and drop to 1260-1255 pattern target zone. Price has now broken slightly below the channel support line making it liable to fall further. The chart below shows the new update.
After breaking below the rising channel as the chart above shows, the price has bounced a bit to retrace to 1282. The two most important resistance levels are 1288 and 1303. A break above 1288 could threaten the bearish expectation and cause a break above the resistance line of the diagonal. If 1288 holds, a dip below the pullback to 1282 could be a good confirmation that the bears will push this commodity to 1260 or 1255 where it could be supported for a big bounce toward 1300 or even higher.