Gold remains sideways despite the US-China trade agreements. The following Gold Elliott wave analysis looks at what could happen next.
December 16, 2019 | AtoZ Markets – The yellow metal is hanging below 1480. The commodity will either continue the bearish correction from 1557 to the 1400 handle or resume the long term bullish trend toward 1600. However, it seems the former has a better chance as market sentiment is driving toward the ‘risk-on’ scenario. The US-China trade conflict, which has been the major risk concern for traders is getting resolved at least for now. After meeting strong resistance at 1480-1485, the Gold price dropped to 1458 in the first week of December. But a quick surge ensued, to retest the zone. Meanwhile, the bears have held tight and maybe if a third retest happens, we will have to see the price reaction. In all, the market is still within the bearish influence until a massive surge happens above 1520.
The latest on the US-China trade deal
The UK parliamentary general election dominated headlines last week. Attention was shifted to the US-China phase one trade deal immediately afterwards as the December 15 tariffs deadline loomed. However, just as expected, the two countries suspended their tariffs plans and have now concluded phase one talks. The latest reports said that the US negotiators are satisfied with the current deal on the table which will expectedly almost double US exports to China. In return, the US will lower some tariffs on Chinese imports. A top negotiator from the US team said on Sunday according to Reuters that ”this is totally done, absolutely”. However, the same report added that China remains cautious.
Meanwhile, this is just the ‘phase one’ of the deal. While market mood improved as stock prices rose, investors are still very cautious. Gold has, therefore, remained range-bound as traders held on to their positions. However, this might not last too long as further positive highlights will drag the commodity to its lowest price in months – toward $1400.
Gold Elliott wave analysis
Technically, the yellow metal remains in the bearish territory. The bearish correction from 1557 is not yet complete. In addition, the rally from 1442 looks rather corrective and thus does not suggest the bearish correction has ended. In the last update, we maintained a bearish bias towards 1400. However, the Gold price has gone rather choppy. The new chart below suggests a dip to 1400 at least is still high on the cards (Charting tools from TradingView).
A bearish double zigzag pattern is emerging from 1557 to complete the 4th wave of the long-term bullish impulse wave development. The wave (a)-(b)-(c) of Y (circled) is emerging from 1520. If there is a breach above 1520, the wave formation will become invalid. However, if wave (b) of Y remains within its channel and drops below 1460, the Gold price should decline further to the 1420-1400 target. A lot more will be revealed concerning the trade relation between US and China this week and in the coming weeks. We will have to see how the yellow metal reacts.