Risk-on sentiment resumed late week and has continued this week following some positive news from the US-China trade deal. Gold price plunges as a result.
November 25, 2019 | AtoZ Markets – The Gold market has hit its lowest price in the last one week after contradictory trade deal headlines. This thus confined the metal within the 1465-1478 range for the most part of last week. However, the market closed on the low after a minor revisit of 1473. 1474-1474, therefore, retained its resistance power as the bears finally surrendered. The bearish run has continued this week and now close to 1456 support level. The market sentiment has been a bit upbeat this week. The market now seems to look ahead to a successful phase one deal between the US and China.
Gold price plunges on positive reports
A successful trade deal should see Gold price plunges further beneath the 1443 support level as investments flow from risk-off to risk-on assets. Meanwhile, the latest news coming from the US and China have been positive in this regard. The US President Trump has said that China trade deal is coming along well. The American leader spoke with a softer tone this time around. In addition, on the Hong Kong rights bill, he said that an announcement will come very soon. China has also added to the encouraging reports with the recent government imposition of stricter penalties on identity theft which is a key priority of the US government. The US and Asian equities have reacted positively to the news.
Gold Elliott wave analysis
Technically, it looks like the Gold price will drop to 1442 and even below it. The bearish correction from 1557 has lasted for 11 weeks. The emerging pattern can be taken as either a zigzag or double zigzag structure. However, it seems the two patterns will have the same effect. The second leg of the zigzag ended at 1517 with a triangle pattern. Since the breakdown below the triangle pattern, we have expected the last leg to hit 1420-1400 support zone. In the last update, we used the chart below (All the charting tools used are from TradingView)
The Gold price has now broken below the purple channel. Either the emerging pattern from 1517 will complete an impulse wave (for a larger zigzag pattern from 1557) or a zigzag pattern (for a larger double zigzag pattern from 1557), it seems the metal will drop further as the new chart below shows.
The price is close to breaking below 1456 support level. If the market validates this wave analysis, it should decline below 1442 toward 1420-1400 support zone.