The gold price might slump to 1400 if the price breaks below a critical support level. The following gold Elliott wave analysis looks at what could happen next.
December 10, 2019 | AtoZ Markets – The gold price ended the last week bearish after a much better than expected job data from the US. The greenback gained across the board. The yellow metal quickly dropped to 1460 from 1480 as a result. The job data came indeed as a trigger. From a technical perspective, Gold was attracted to the bears after being held from rising above the 1480-1485 resistance zone. The positive momentum coming from the US-China trade situations forced the resistance and thus dragged the price to 1471 before the US data finished off after a minor recovery. Gold is currently trading around 1463 and still remains in the bearish territory.
Market mood is improving; risk appetite is increasing
Since the last week, the general mood of the market has improved. The news coming from Beijing and Washington are positive and investors now expect the completion of the phase one deal. The clock now ticks towards December 15 tariff deadline after which additional trade tariffs from the two countries will go into effect. However, the two parties are optimistic.
Meanwhile, despite this positive news, investors are a bit wary of the new trade difficulties in North America between the US and two others – Canada and Mexico. However, the headlines on Monday and Tuesday revealed that Congress is making moves to modify trade agreements with Canada and Mexico.
Gold Elliott wave analysis: further slump toward 1400?
Gold is completing the 4th wave correction of a long-term bullish impulse wave. The 4th wave started at 1557 and we have talked about the emerging corrective pattern in the previous updates. Meanwhile, the rally from 1445 to 1484 completed a zigzag/double zigzag kind of structure. That indicated that the larger bearish correction will most probably continue below 1445. In the last update, we used the chart below (Charting tools from TradingView).
Price completed this pattern at the 1480-1485 resistance zone which we looked forward to when the price rallied from 1450. The current dip, as the chart below shows, validates the expectation in the chart above.
An a-b-c leg could continue the bearish correction to 1400. The first leg from 1484 is now completing a bearish impulse wave. We will focus on how that develops for now. Unless the current surge continues above 1471, we should see the Gold price drop to or below 1445 to complete the impulse wave.