Explaining Gold ‘s Weakness With Elliott Wave Logic

Gold ignores global risks in Elliott Wave fall to $1460

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 would be another escalation of the trade war, the U.S. is considering the delisting of Chinese companies from American exchanges; And let’s not forget the increasing tensions between Iran and Saudi Arabia after the drone attacks on Saudi Aramco facilities conducted just two weeks ago.

Given gold’s safe-haven status, one wonders why is it falling with so many global risk factors around. If you have been following the recent political and economic developments, it doesn’t make any sense for gold to decline. Fortunately, it makes a lot of sense from an Elliott Wave point of view. The chart below, sent to our subscribers on September 25th, explains.

Elliott Wave analysis puts traders ahead of gold's plunge to 1460

Gold’s daily and 4-hour charts suggested the decline from $1557 was probably not over yet. The 1-hour chart shown above helped us identify the exact price pattern that was going to cause the plunge.

Price of Gold Slumps, Ignoring Global Risks

It looked like the pullback from $1555 was going to evolve into a larger w)-x)-y) correction. Both waves w) and x) seemed to have taken the shape of an expanding flat correction. Whatever shape wave y) was going to take, it had to breach the bottom of wave w) and make a new low.

According to this scenario, another decline in wave y) towards $1460 was supposed to occur as long as $1557 remained intact. With gold above $1530 at the time, this setup offered an attractive risk/reward ratio of 2.6.

Elliott Wave pattern causes a 4.5% gold price decline

Gold started plunging almost immediately. In just a week, the yellow metal lost 4.5% of its value, delivering the reward part of the setup. The risk part, fortunately, never materialized since the bulls couldn’t even come close to $1557. As it turned out, one Elliott Wave reason for gold to fall proved to be stronger than the numerous macro reasons pointing higher.

What will Gold bring next week? That is the subject of discussion in our next EW PRO analysis due out late Sunday!

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