Gold Searches For Bottom (Elliott Wave)

Executive Summary

• Trend Bias: Gold (XAUUSD) appears to be nearing the ending stages of wave y of (ii) lower.
• Key Levels: Slight decline to $4,380 – 4,500 to finalize the correction lower
• Bearish view while price holds above $4,099.

Gold has been correcting lower since a near-term top developed on April 17. The decline is viewed as a temporary wave (ii) that, when finished, would lead to a powerful wave (iii) higher.

Current Elliott Wave Analysis

The current Elliott wave count for gold shows the yellow metal is in wave ((c)) of y of (ii), a corrective dip.

This wave (ii) is correcting the rally from March to April. We anticipate that it will be a partial retracement, holding above 4,099. Currently, gold has corrected a Fibonacci retracement of 38%. However, the decline appears to include an incomplete wave count.

Therefore, it is possible that this corrective decline will dig deeper to the 61.8% Fibonacci retracement level near 4,383. Near this are is where wave y would be a Fibonacci extension 1.618 x wave w. This is a common wave relationship between two parallel waves.

Also, hovering near this same price zone is the 200 day simple moving average based on the daily price chart. Therefore, if gold is successful in falling to near 4,380, I suspect strong support will develop leading to a bounce and possibly a kickoff to wave (iii) higher.

Bottom Line

Gold appears to be declining in wave ((c)) of y of (ii), a larger bearish double zigzag pattern. The pattern is mature and is nearing its end, possibly in the 4,380 – 4,500 price zone. Support is also available near 4,380 with the 200 day simple moving average.

If this is correct, then gold would rally from that lower price zone to retest all-time highs. In the unexpected event of gold prices pushing below 4,099, then we’ll need to adopt an alternate wave count.