Gold has been trading in a range between 1178 and 1430 since mid-June 2013, without being able to make a new low or a new high. Fortunately there is one Elliott Wave pattern fitting the description of “no new lows or highs”. It is called triangle. Triangles are sideways corrective patterns, which consist of five waves, labeled A-B-C-D-E. Let’s see if the price action in gold from June 2013 till now looks like the above-mentioned pattern.
Yes it does. It seems that we are in the final wave E of the triangle. Wave E should have a three-wave sub-structure. This means that it is far from completion yet. Prices around 1365 could be reached, before we can call the whole pattern finished.
Now, there is another very important characteristic about triangles. They precede the final movement of the larger trend sequence. This means that a triangle could occur only as wave 4, wave B or final wave X. So we need to see in what position this triangle fits into the bigger picture. In our case there are two alternatives.
Without paying much attention to details, we can count the decline from 1921 as an unfinished impulsive five. In this situation, our triangle fits perfectly in the position of wave 4, so we should expect wave 5 to lead gold to the 1100 area. But there is another possible count, where the details matter. In order to call this an impulse, waves 1 and 3 should be impulses too. Well, wave 3 certainly does not look like one.
Wave 3 seems to be constructed of only three waves A-B-C, which turns it into wave Y. The relabeled weekly chart is shown below.
As you can see, the only difference is in the wave structure and the labeling, but not in the expected result. Both scenarios suggest weaker gold during the months to follow with 1100 being the probable downside target.