Bottom line: Gold might have carved a meaningful top around $1703 or could be very close to carving a major top. A break below $1560 would confirm that the trend has finally reversed.
Technical Analysis:
Gold might be very close to forming a multi-year top around $1700/10 mark, before reversing lower again. The yellow metal is near to completing a corrective rally that has lasted for almost 5 years since December 2015 lows at $1046.00 levels. Looking at the larger degree wave counts, the drop from $1900 through $1046 was in 5 waves, hence it could be Wave A of a larger corrective drop A-B-C in the making. Since $1046 lows, Gold has produced a counter trend rally in a combination (W)-(X)-(Y) where (W) was in 3 waves, (X) lasted for several years, consolidating into a barrier triangle that terminated around $1262 levels in May 2019. Since then Wave (Y) has unfolded into a 5-3-5 structure labelled as A ($1557), B ($1445) and potential C ($1703) respectively. If the above counts are correct, Gold should be preparing to reverse lower and continue pushing into the last leg of the corrective drop that had begun since $1900 levels. Believe it or not, upside from here is limited while considering the risk reward ratio for the yellow metal and traders might be preparing to sell on rallies, with a protective stop just above $1705 mark, with short term projected targets below $1560.00 levels. At the moment, Gold is seen to be trading around $1663/65 levels and might test $1703 one last time before giving in to bears. Please note, that downside potential for Gold remains below $1046.00 to complete the corrective zigzag wave structure since $1900 levels earlier. Watch out for a potential top and reversal pattern close to $1700 levels going forward.
Prepared by
Harsh Japee, Technical Analyst.
Gold Chart
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