Bottom line: Gold bearish structure would remain intact until prices stay below $1611 levels. A meaningful top might be in place and the yellow metal could be poised for a long term bearish reversal.
Technical Analysis:
Gold has retraced the drop from $1611 through $1535, up to fibonacci 61.8%, and might have carved a lower top at $1588 yesterday. A drop below $1576 would confirm the above and bears should push prices lower towards $1495, $1470 going forward. The short term wave counts reveal that Gold prices had dropped as an impulse, between $1611 and $1535 levels. The rally between $1535 and $1588 has been in 3 waves, which is corrective. If the above counts hold true, we should witness a sharp drop towards $1470 with $1611 top intact; producing a 5-3-5 wave structure. Alternately, if the rally from $1535 unfolds into 5 waves, prices might push towards yet another show high around $1625 levels before reversing lower again. In either case, looking at a risk-reward ratio, it is safe to sell on rallies going forward. A high probable trade setup from here is to remain short ($1580/85), with protective stop at $1611 and a potential target at $1470. Please note that there might be one more marginal high above $1588 before Gold reverses lower. Watch out for a bearish turn from $1590/95 zone, which is fibonacci 0.786 retracement of earlier drop. Also note that the larger degree wave counts are suggesting a multi-year counter trend rally coming to an end. A larger (W)-(X)-(Y) counter trend rally might have already terminated at $1611 or could terminate around $1625, before a major bearish reversal. Wave (Y) was underway since $1262 lows in May 2019, and it has produced an A-B-C/5-3-5 wave structure at $1557, $1445 and $1611 respectively. Watch out for price action to break below $1576 for the drop to accelerate.
Prepared by
Harsh Japee, Technical Analyst.
Gold Chart
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