Gold’s Rebound May Be Temporary (Elliott Wave)

Executive Summary

• Trend Bias: Gold (XAUUSD) has been rallying higher in wave ((b)) of a zigzag.
• Key Levels: Resistance target zone between $5,025-$5,316.
• Bearish view while price holds below $5,596.

Gold’s heightened volatility continues through today. The Elliott Wave pattern hints that the correction may not be complete.

Current Elliott Wave Analysis

Gold has continued its strong rebound after a 2-day correction. The rally appears to be Elliott wave ((b)) of a larger zigzag decline. This hints that after this rally exhausts, then a wave ((c)) decline likely carries to new lows below $4,400.

Zigzags unfold as a 3-wave pattern and this bearish zigzag is labeled ((a))-((b))-((c)). If  Gold prices are rallying in wave ((b)), then we know from our Elliott Wave studies that it will subdivide as a corrective wave.

We can use the Fibonacci retracement levels to pinpoint potentially bearish reversal points. The 61.8% appears near $5,106 and the 78.6% arrives at $5,316.

Additionally, we use the Fibonacci extension tool to list out potential target zones of wave © of ((b)). The 100% Fibonacci extension appears near $5,025 and the 161.8% extension level is near $5,309.

Therefore, we can highlight a potential target zone between $5,025-$5,316. If gold prices reach this zone, then the potential for a bearish reversal is increased.

If this wave count is correct, then when wave ((b)) is completed, then a bearish downtrend in wave ((c)) likely carries gold prices below $4,400, possibly reaching $4,000.

Previous horizontal support from November looms near $4,000.

Bottom Line

Gold appears to be approaching a near-term top in wave ((b)) of a bearish zigzag. If correct, then a decline in wave ((c)) would be temporary and possibly reach support near $4,000.

If gold keeps accelerating higher above $5,300, then we’ll reconsider the wave count.