Gold Elliott Wave Analysis: Would Price Break Upside or Downside?

Gold has continued to trade below 1298 for nearly two weeks. Will price return upside or drop downside? The following give insights based on Elliott wave theory.

January 18, 2019 | AtoZ Markets – After hitting 1298 on 4th January, Gold dropped to 1276 but couldn't continue in any direction afterwards. For nearly two weeks, price has oscillated between 1298 and 1276. A break away from any of these sideways extremes would probably give a big clue on the next direction of this commodity. There are mainly two possibilities – a bullish continuation or bearish correction. Anyway we look at it, it seems the bullish trend would continue to 1370 or even above – some 800 pips away.

In the last update, we had two scenarios that both supported the continuation of the bullish trend but having different dimensions. One expects a deep pullback before the bullish move proceeds while the other expects a shallow correction followed by a break above 1300 to continue upside. Below, we look at how price has moved with or against these scenarios and to check which is more valid or invalid.

Gold Elliott Wave Analysis and Important Price Levels

1st Scenario, 15 Mins

The chart above was used in the last update. The 3rd wave of the rally from 1195 ended at 1298 before price spent the last two weeks moving sideways. The sideways pattern looks like a triangle. The chart below shows the triangle is completing just around 1288-1290.

The triangle has completed as the chart above shows. A break above 1295 is needed to confirm price's commitment to the upside. If the upside breakout happens, further rallies could be seen to 1320. However, a dip below 1285-1286 would cause a bread down instead. Triangles are often continuation patterns. The second scenario would be more appropriate to deal with this possibility.

2nd Scenario, 15 mins

Unlike the 1st scenario, this expects a deeper dip. Triangles are often very shallow. A dip below 1285-1286 zone might set price for a different corrective dip. The chart below was used in the last update.

This scenario is still very much valid. Price didn't break above 1295 before the current slip. Will a break below 1276 happen finally? The chart below shows how price has moved afterwards.

The odds should be in favor of bearish breakout below 1277 to 1272-1275. Once the triangle in the 1st scenario is invalid with a break below 1285-1286, the road might just be clear for the bears. However, the dip is expected to be corrective. Price should continue upside afterwards.

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