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 halt due to the rapidly-spreading coronavirus pandemic, gold is literally crashing. The yellow metal is down 14.5% in less than a week. It peaked at $1703 on March 9th, but fell to $1451 so far today.

Why is gold crashing during the biggest health crisis since 1918 and possibly the biggest economic crisis since 1929? We have no idea. Let the journalists and the academics try to explain it. We prefer to focus on the fascinating fact, that somehow, the Elliott Wave patterns managed to send us a warning prior to the crash. Take a look at the chart below, sent to subscribers as a short-term update on Wednesday, March 11th.

This chart focused on the structure of wave 5 of a much larger wave structure, covered in Monday’s comprehensive premium analysis. It revealed that wave 5 looked like a complete five-wave impulse, labeled i)-ii)-iii)-iv)-v). The sub-waves of waves iii) and iii of iii) were visible, as well.

According to the Wave theory, a three-wave correction follows every impulse. So, if this pattern had formed in vacuum, a relatively small decline to the support of wave iv) near $1560 could’ve been expected. The thing is that the entire pattern was only the fifth wave of a bigger impulse. Therefore, the anticipated decline was also supposed to be bigger and erase the entire wave 5.

That was the logic we followed when we wrote that “targets near $1440 remain plausible, but traders willing to give this bearish setup a shot must keep a stop-loss at $1703 to avoid unpleasant surprises.” Gold was still above $1660 at that time. Five days later now, the unpleasant surprises were for those who ignored the patterns and relied on the news for guidance instead.

$1703 survived. More importantly, the reward part of the equation materialized much faster than expected. Gold has already erased almost all of wave 5 and is now trading in the support area of wave 4. Can that support hold as the bulls rush for the exits?

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