close icon

Gold Fails as a Safe Haven Amid Coronavirus Panic

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

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 plunging, the price of gold fell, too. The yellow metal dropped from a 7-year high of $1689 to as low as $1563. In other words, the best safe-haven lost 7.5% just when investors needed it most.

Popular financial media attributes gold’s decline to profit-taking from traders. Had gold been rising, they could’ve just as easily explained it with the coronavirus. Instead of looking for after-the-fact explanations, we sent the following chart of gold to subscribers before the open on February 24th. It shows that if one looks at it from an Elliott Wave perspective, gold’s weakness wasn’t that surprising.

Elliott Wave analysis puts traders ahead of gold's drop

Gold’s 4-hour chart reveals what we believed was waves 2, 3, 4 and 5 of a five-wave impulse. According to the theory, a correction follows every impulse pattern. So, instead of joining the bulls near $1640, we thought “long positions should be avoided, despite all the fundamental reasons to be bullish“.

And the list of fundamental reasons to be bullish on gold as a safe haven asset was a long one:

  1. The coronavirus
  2. Slow economic growth
  3. Rising tensions in Syria
  4. Continued easing by the Fed
  5. The inverted yield curve signalling a possible recession ahead
  6. You name it…

Yet, gold ignored everything and fell anyway. Take a look at the updated chart below for reference.

Gold loses 7.5% and fails as a safe haven amid coronavirus market panic

Gold reached $1689 on Monday, but spent the rest of the week declining. A single Elliott Wave pattern proved more reliable than all the bullish reasons above. So the next time you find yourself thinking “this is happening, so the price of X must go up/down” don’t forget to check the charts. Do the patterns support your logic?

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



Stay informed with our newsletter

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

Privacy policy
You may also like:

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 »

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 »

Famous Pattern Put Gold Traders Ahead of the Curve

Last week, gold finally broke out of the consolidation it has been locked in for almost a month. The price fell to $1400 before rising to $1453 on Friday, July 19th. But instead of maintaining the positive momentum, the bulls lost steam and allowed the bears to close the weekly session at $1425.66. Fortunately, a…

Read More »

Silver Looking for Support near $15 Mark

A little over a month ago, the price of silver was hovering around $16 following a strong rally from as low as $13.90 in November 2018. Many traders saw this 15% surge as a sign of even better things to come. Unfortunately for them, yesterday an ounce of silver was switching hands for about $15.…

Read More »

More analyses