Bottom line: Gold remains bearish until prices stay below $1611 mark. Please note that any push higher would be short lived. The yellow metal is good to sell on rallies.
Technical Analysis:
Gold might be preparing to drop towards the $1500 mark and further while recent highs at $1611 remain intact. Looking at the lower degree wave structure since $1611, the yellow metal has produced a 5 wave drop between $1611 and $1540 respectively. The subsequent rally might have taken shape of an expanded flat or combination a-b-c terminating around $1592 levels. We have not yet labelled here but a lower degree Waves 1 and 2 might be in place at $1540 and $1592 respectively. If the above counts are correct, we could expect a sharp Wave 3 lower towards $1500 and $1475 respectively. Also note that Wave 2 terminated close to the 61.8% retracement of Wave 1, which is an ideal according to the guidelines. Going further into the sub waves within Wave 3, Gold might have produces I and ii at $1547 and $1576 respectively. If the above wave structure holds well, Gold ideally could remain below $1592 and a sharp iii rd of 3rd wave could unfold towards the $1500/1475 region. Traders might be willing to hold short positions taken earlier or initiate fresh with a protective stop above $1611 and potential target towards $1500 and $1475 respectively. The larger degree wave counts are also suggesting that Gold might have terminated its multiyear counter trend rally at $1611. The entire structure unfolded as (W)-(X)-(Y) with (X) as a multiyear triangle that terminated at $1262 in May 2019 followed by (Y) unfolding as A-B-C and potentially terminating at $1611. Please note that fibonacci 0.618 extensions point towards $1620/25 levels and hence probability still remains for a last push before reversing lower again.
Prepared by
Harsh Japee, Technical Analyst.
Gold Chart
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