close icon

The Elliott Wave Logic in Gold’s Ups and Downs

There is a pattern to be found in gold’s seemingly random walk

In the middle of last month, the price of gold was hovering around $1230 for a while. Then, on February 15th, it made a bottom at $1216.60 and started rising again. The optimism went on for a couple of weeks until the precious metal reached $1264, where the bulls finally ran out of steam. As of this moment, gold is trading around $1227 and still looks vulnerable.

The fact that the market is constantly changing direction is nothing new. What we are interested in is a method, which could help us use its swings for our trading purposes. There are probably hundreds of different techniques traders use to sneak a peek into the future. The one we prefer is called the Elliott Wave Principle. That was the one we applied to the following chart of gold, which was then sent to clients before the market opened on February 13th.(some marks have been removed for this article)
gold 1h feb 13
The rally between $1181 and $1245 looked like an incomplete five-wave impulse. Therefore, according to the most probable scenario, it was supposed to evolve into one by adding another advance in wave v-circled. Within every impulse, the first and the fourth wave cannot overlap. This basic Elliott Wave rule allowed us to identify $1215 – the top of wave i-circled – as a critical level to the bulls’ ambitions. As long as it was intact, gold was likely to continue towards $1250, at least. The next chart shows how things went.
gold 2h 27 feb
It was close, but $1215 managed to survive and that is what counts. The best the bears were able to achieve was $1216.60, which meant the positive outlook was still on the table. By the time we had to sent our February 27th update to subscribers, gold was already approaching $1260. That is when another possible scenario presented itself. As visible, we noticed that the entire uptrend from the $1123 low looks like a leading diagonal pattern. It consisted of five-waves, waves 1 and 4 were overlapping and each waves was shorter than the previous one. Diagonals carry the same message as regular impulses: expect a reversal. We did not have to wait long for it to happen.
gold march 3
Gold prices did not even managed to touch the upper line of the diagonal. Instead, the initial optimism quickly disappeared, making way for the bears to breach the lower line and confirm the fact, that the bulls are no longer in control. Nearly $40 to the south later, gold bugs are wondering if they should switch to bitcoin, which is now officially more valuable than gold.

Recommended reading: 4 Lessons from Bitcoin’s Manic-Depressive Past

Is bitcoin going to dethrone gold as the world’s best safe haven we cannot know. What we do know is that the Elliott Wave Principle is something you would not want to do without.

Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Silver Price Going for $19 Before Retracing to $16

The price of silver, otherwise known as a safe-haven asset along with gold, crashed sharply as the coronavirus panic swept equity markets. XAGUSD fell to $11.64 on March 18th just as investors needed a refuge the most. But the precious metal has appreciated significantly since the depths of the selloff. As of this writing, silver…

Read More »

Gold is Crashing. Elliott Wave Somehow Predicted It

Common sense dictates that in a time of crisis demand for safe-haven assets jumps. The price of gold, for instance, the most sought-after asset in difficult periods, climbed to an all-time high of $1921 shortly after the 2008-9 market crash. This time though, as the world economy is on the verge of grinding to a…

Read More »

Gold Fails as a Safe Haven Amid Coronavirus Panic

The S&P 500 was down 14.4% for the week at one point Friday on fears the coronavirus outbreak is going to become a worldwide pandemic. It is common knowledge that investors turn to gold when stocks and other risky assets decline. Last week, however, that wasn’t the case. While stock markets around the globe were…

Read More »

Silver Bears Discouraged by Fibonacci Encounter

We last wrote about silver in March 2019, when the precious metal was hovering slightly above $15. Our analysis of its 4-hour chart gave us plenty of reasons for optimism. And indeed, six months later in September the price reached $19.65. Currently, silver is trading near $17.75, up from $16.53, but still down from that…

Read More »

Gold ‘s Surge and US-Iran Have Little In Common

Gold climbed to a six-year high on rising tensions between the US and Iran following the assassination of Iranian General Qasem Soleimani. The safe-haven asset reached $1590 earlier today as #WorldWarThree started to emerge on Twitter. We hope WWIII remains just a hashtag. In the meantime, we are once again baffled by how the media…

Read More »

Gold Traders Better Off Ignoring the News

In our previous article about the precious metal readers saw how the Elliott Wave principle put us ahead of gold ‘s $72-decline from $1531 to $1459. In short, the hourly chart made us think a three-wave decline from $1555 was still in progress. Hence, the bears remained in charge and more weakness could be expected.…

Read More »

Explaining Gold ‘s Weakness With Elliott Wave Logic

Gold bulls suffered in four of the last five daily trading sessions. A week ago, on September 24th, the price of gold briefly exceeded $1535. Earlier today, it touched $1459 before recovering to $1466 as of this writing. In the meantime, global economic growth is slowing and several recession indicators are flashing red; In what…

Read More »

More analyses