Bottom line:  Gold bearish structure should remain intact until $1611 is intact. The above is potential termination of a larger degree Wave (Y).

Technical Analysis:

Gold might have formed a meaningful top at $1611 on January 08, 2020 and the current rally could be seen as counter trend. The short term charts are suggesting that the recent drop between $1611 and $1536 unfolded into 5 waves. If correct, Gold has more room left on the south side after the current pullback is over. Please note that potential remains for a push towards $1585 levels before reversing lower. Looking at the short term counts, the drop towards $1536 might be seen as Wave 1. The recent counter trend rally may terminate Wave 2 towards $1580/85 before Wave 3 resumes lower again. Alternately, Gold could print yet another shallow high around $1625 levels to terminate larger degree Wave (Y), which has been unfolding since $1262 lows. In either case, Gold could be very close to a major bearish reversal. Hence a safe trading strategy could be to sell on rallies through $1580/85 levels, with protective stop losses above $1611 and potential targets towards $1400 respectively. Looking at the larger degree wave structure, the yellow metal has been producing a multiyear counter trend rally (W)-(X)-(Y), since $1046 lows in December 2015. Also note that Wave (X) unfolded as a multiyear triangle wave structure that finally terminated at $1262 in May 2019. Since then, Wave (Y) has been unfolding as a 3 wave structure A-B-C. Wave A had unfolded into 5 waves and terminated at $1557, Wave B correction terminated at $1445 and Wave C might have topped at $1611 or might print yet another shallow high. With the above multiyear corrective structure close to termination, it is safe to sell on rallies going forward.

Prepared by

Harsh Japee, Technical Analyst.

Gold Chart

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