Bottom line:  Gold remains bearish in the short term and might be looking to drop through $1400 levels, also previous Wave 4, before resuming rally.

Technical Analysis:

Gold might drop one last time towards $1400 or close before the correction that began from $1557 could complete. Until prices stay below the $1520 resistance, the above count remains valid. As discussed earlier, corrective waves are at times tricky since they can take various forms and right now Gold looks to be unfolding a combination. A simplified way to express the above pattern is a-b-c-X-a-b-c (not labelled on chart). The first a-b-c potentially terminated around $1460, X wave was a potential triangle terminating at $1520 and the second a-b-c is potentially underway with a and b in place at $1445 and $1486 respectively. If the above short term wave count holds true, prices should remain below $1520 and proceed lower towards $1400/11 levels, going forward. A break below $1459 would confirm a top in place at $1486. Looking at the long term wave counts, the structure still remains bullish with a buy on dips trading strategy. Gold is probably into Wave (Y), within a larger (W)-(X)-(Y) counter trend rally that began in December 2015 from $1046 levels. Furthermore, Wave (X) unfolded into a multi-year triangle and terminated at $1266 levels in May 2019. Since then, Wave (Y)(should sub divide into 3 waves) has been in progress with Wave A being terminated at $1557 levels earlier. The recent price action could be seen as Wave B in progress and potentially unfolding as a combination, expected to terminate close to $1400/10 levels. Hence a short term high probability trade setup could be on the south side, against $1520, and potential targets at $1400/10. A bullish bounce could be expected from those levels, dragging through fresh highs.

Prepared by

Harsh Japee, Technical Analyst

Gold Chart

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