Bottom line: Gold medium term bullish outlook remains intact but short term drop towards $1400/15 levels possible.
Technical Analysis:
Gold bullish structure could be delayed if prices remain below the $1500 mark and in turn produces a complex corrective structure dragging prices lower towards $1400/15 levels. Looking into the medium term wave structure, Gold is seen to be progressing Wave (Y) within the (W)-(X)-(Y) corrective rally since $1046.00. Within Wave (Y), an impulse Wave A is already in place at $1557 (began since $1266 lows); since then a complex corrective Wave B seems to be unfolding. As mentioned in our previous discussions, corrective waves can take several forms and combinations, testing out a traders’ patience, unlike the impulse waves which are simple to identify. In this case, Gold might be producing a double zigzag and could print one more low below $1445 levels, to complete the structure. Since the previous wave 4 was around $1400 mark, we can expect Wave B to terminate close to $1400/15 levels, before Wave C rally could resume higher. A break below $1451, would confirm the above and accelerate the projected drop. The entire corrective drop could be seen as a W-X-Y (not labelled here), with Wave X unfolding as a triangle. A push above $1500 levels is required to confirm that a meaningful bottom is in place at $1445. An aggressive trading strategy could be to remain short against $1520 with a projected target around $1400/15; while a more conservative and towards the trend strategy could be to buy on dips through $1400/15, against $1380, with projected targets above $1580, going forward. It is suggested to remain flat and look to buy on dips rather than trade against the trend. Watch out for a sharp potential drop towards $1400/15 first, then bullish again.
Prepared by
Harsh Japee, Technical Analyst
Gold Chart
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