United States President Donald Trump announced import tariffs on approximately $60 billion worth of Chinese goods. China responded modestly by imposing tariffs on just $3 billion worth of U.S. products, but that was more than enough to spark fears about a global trade war. Investors apparently did not like how the geopolitical landscape is shaping and hurried to switch their stocks for gold. The Dow Jones Industrial Average lost 724 points on March 22nd, while bullion gained 2.44% in three days, climbing from $1311 to $1343. Fortunately, while the price of gold was hovering around $1317 on Wednesday, March 21st, we sent the mid-week updates to clients. The chart below was included.
The 30-minute chart of gold was a real mess, but a five-wave impulse from $1302 to $1325 that took place between March 1st and 2nd gave us hope that the bullish case was still alive. It also meant that gold’s entire price development since March 2nd, including the new high at $1340, was supposed to be some kind of a correction. It was neither a flat correction, nor a zig-zag, so we thought it must be a combination of both.
To be more precise, it appeared that a corrective combination between an expanding flat correction in wave W and a simple zig-zag in wave Y has been in progress between the $1325 high and the bottom at $1307. Therefore, as long as XAUUSD was trading above $1307, higher levels should be expected.
Today is March 23rd and as of this writing, gold stands at $1342. $1307 was never tested and despite the fact that we have been waiting for this rally for quite a while, it is great that it eventually happened. Some insist to explain gold’s surge with the looming US-China trade war, while waiting for President Trump’s next step. We, on the other hand, prefer to rely on the Elliott Wave Principle instead.