Bottom line:  Gold rallied sharp to terminate around $1689 levels yesterday and reversed lower closing the day around $1658. Believe it or not, stakes are high for a bearish reversal with upside looking limited, going forward.

Technical Analysis:

Gold bulls have either managed to carve a meaningful top at $1689 yesterday or is very close to carving one just above $1689, before reversing lower for good. Looking at the short term wave counts since $1547 lows, the rally looks to be an impulse with the lower degree 5^th wave being an extended one. Potential remains that the A-B-C structure that began since $1260 lows in May 2019, might be complete at $1689. If the above count is correct, Gold seems to have terminated a multi-year counter trend rally (W)-(X)-(Y) spanning over 5 years since December 2015 lows at $1046. Wave (X) triangle terminated at $1262/64 and since then Wave (Y) unfolded into a 5-3-5 (A-B-C) rally. Furthermore, Wave A had terminated at $1557, followed by B termination around $1447 and Wave C around yesterday’s high at $1689 respectively. It cannot be confirmed at this point in writing but a 5 wave move lower from $1689 would certainly confirm a bearish reversal ahead. The yellow metal is seen to be trading around $1635 levels at this point in time and a push below $1630 would instil further confidence of a potential 5 wave drop since $1689 levels. Traders might be looking to sell on rallies once a 5 wave drop is confirmed from $1689. Alternately a bullish turn from current price action would attempt yet another rally past $1689 before reversing lower. In either case, upside remains limited from here and it might be a better trading strategy, to prepare to sell on rallies going forward

Prepared by

Harsh Japee, Technical Analyst.

Gold Chart

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