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Dr. Arnout Ter Schure
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Gold

Gold reached an all-time high (ATH) of $2089 on August 7 last year and has since been in an ugly downtrend, losing almost 15% of its value. See Figure 1 below. Meanwhile, I have helped navigate my Premium Members through this uncertain period, using the Elliott Wave Principle (EWP) and Technical Analyses (TA).

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Figure 1. GOLD daily chart with detailed EWP count and technical indicators.

The Elliott Wave Principle points to a bounce followed by the next move lower.

GOLD is per the EWP in a double zig-zag Primary-IV correction (see here for an explanation): black (major) waves a, b, c. Each of these waves consists of three waves (aka. fractals): red (intermediate) waves a, b, c. Gold is, IMHO, now in the last leg lower: major wave-c, which should ideally target between $1620-1680. Note that the red, intermediate, current wave-a is equal in time and price to the red, intermediate wave-a that completed September last year at this week’s low: dotted black and red down arrows, respectively. Perfect time-price symmetry. Thus, if the double zig-zag analogy holds, we should now see a -complicated- red b-wave bounce similar to the September->October 2020 move before the last red wave-c of black wave-c (orange arrows).

I anticipate this bounce to last several weeks and target the declining 200-day Simple Moving Average (200d SMA), now at $1860, but it should be at around $1820 horizontal resistance by then. Note that price is below its declining 20d SMA, which in turn is below its declining 50d SMA, and which is subsequently below the 200d SMA. That is a 100% Bear market setup. I must, therefore, treat every rally as a counter-trend bounce, aka Bear market rally, until the charts have improved enough, i.e., price>20d>50d>200d SMA to tell us the anticipated next rally (Primary V) is underway.

Namely, the bigger picture EWP count -see Figure 2 below- anticipates wave-c to target around $1675 as well (red arrow), from which the blue Primary-V of (purple) Cycle-C should rally to the $2200-2400 target zone.

Figure 2. GOLD monthly chart with detailed EWP count and technical indicators.

Bottom line: shorter-term, I am looking for a somewhat tricky, whipsawing, move higher, ideally to around $1820+/-40. From there, I expect several weeks of downside back to $1620-1680. After that, I anticipated the next Primary-V rally to ~$2300+/-100. However, a weekly close below $1605 targets $1495 and strongly suggests a Primary-V wave may not happen as the decline is almost too deep for a wave-IV, and the odds are not in favor of it anymore. Hence, at current price levels, the risk/reward for GOLD on the long side is IMHO 120/600 = 1 to 5. Quite good, if I may say so, but for now, I prefer to wait things out until confirmation of a new uptrend. Trade safe!

For a look at all of today’s economic events, check out our economic calendar.

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