Bottom line:  Gold bearish structure remains intact until prices stay below $1703 levels. The counter trend rally is under way and is expected to terminate around $1606/15 levels before resuming lower again.

Technical Analysis:

Gold is producing a counter trend rally as a-b-c (not labelled here) since the $1450 lows on March 16, 2020. Looking at the wave counts since $1703 levels, the yellow metal has clearly produced an impulse drop towards $1450, labelled as Wave 1. As expected, Gold is currently producing a flat corrective wave structure 3-3-5 since $1450 levels and is expected to terminate close to $1615, going forward. Please note that fibonacci 0.618 resistance is seen towards $1606 levels and a bearish reaction could be seen there. Also note that fibonacci 1.618 extension of the counter trend rally is seen to terminate around $1617/20 levels, which is close to the 0.618 retracement of Wave 1. Wave 2 termination could be expected anywhere between $1606/20 levels going forward. If the above counts are correct, we can expect a bearish reversal from $1606/20 levels and Gold could resume towards $1296 levels as Wave 3 drop unfolds. Looking at the higher degree wave counts again, Gold seems to have finally completed its counter trend rally since $1046 levels in December 2015. The yellow metal has risen in 3 waves as a combination, (W)-(X)-(Y) towards $1703.00 respectively. Also note that Wave (X) was a multiyear consolidating triangle structure that finally terminated at $1262 levels in May 2019. Since then, Wave (Y) has unfolded as an A-B-C (5-3-5) rally terminating at $1557, $1445 and $1703 levels respectively. If the above larger degree counts are correct, Gold is poised for a 5 wave drop either as an impulse or an ending diagonal. Traders might be preparing to initiate fresh short positions around $1606/20 zone.

Prepared by

Harsh Japee, Technical Analyst.

Gold Chart

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