Bottom line:  Gold may be preparing to reverse from $1588-1610 levels. It is too early to project a reversal at this point but be prepared for a bearish resumption soon.

Technical Analysis:

Gold hits major resistance at $1588 yesterday, before pulling back lower again. The metal has traveled/retraced 61.8% of the earlier drop between $1920 and $1046 respectively and hence a bearish reversal from close levels remains high probability.  Looking at the immediate wave counts from $1445 levels lows print on November 12, 2019, Gold seems to have carved lower degree waves within Wave C, Within Wave (Y) as labelled here. Please note that Gold might have completed wave iii at $1587 and could be moving towards Wave iv around $1540 levels. We could then witness a final rally above $1587, to terminate Wave v around $1600/20 levels and also Wave C of (Y). If the above counts are correct, Gold could drop a bit in the next few sessions, before a final rally that terminates above $1587 levels. Alternately, a continuous drop lower towards $1475 from here, could indicate a meaningful top is in place at $1587, and prices should be heading lower to break below major support at $1445. Higher probability remains that of a drop lower towards $1540 zone from here, followed by a rally past $1600, before a major reversal. Trading opportunities can be seen on both sides but it is advisable to book profits on the longs initiated earlier at least partially. We shall be looking for a bearish divergence while prices hit another high above $1587 levels, to confirm and initiate aggressive short positions. An overall 5-3 wave structure is near to completion at a higher degree (Weekly/Monthly chart). One more high towards $1600/20, and Gold should be on its way lower for the next major bearish cycle.

Prepared by

Harsh Japee, Technical Analyst.

Gold Chart

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