close icon

Gold’s Message to Traders Ahead of Trump’s Tariffs

The price of gold bounced up last week after Donald Trump announced import tariffs on steel and aluminium brought uncertainty back to the landscape. The President went even further by saying that if Europe retaliates against the tariffs, the US will impose a tax on cars made by European manufacturers, such as Volkswagen, BMW and Daimler. Analysts even expressed concerns that a “global trade war” is going to take place as other countries, such as China and Canada, are expected to take countermeasures against the protective trade policy of the United States.

Despite Bitcoin’s attempts to take its place, gold is still known as the best safe-haven asset. Common sense dictates that as economic and political uncertainty rises, investors would rush to buy large quantities of the yellow metal. That is exactly what happened in the end of last week, when gold prices bounced up from under $1303 to $1322. The problem is that in order for traders to predict gold’s price swings, they had to be able to read Mr. Trump’s mind and that is not an easy task, to say the least. We would not even try. Instead, we rely on the Elliott Wave Principle, which in this case not only managed to prepare us for gold’s positive reaction to the possibility of a global trade war, but also put us ahead of the preceding decline in the price of the precious metal. The chart below, sent to clients before the market opened on Monday, February 26th, explains how.
gold elliott wave analysis february 26
As visible, the wave structure suggested gold is in the third phase – wave y) – of a w)-x)-y) double zig-zag correction. Zig-zags usually develop within the parallel lines of a corrective channel, so it made sense to anticipate more weakness towards the support of the lower line of the channel near $1300. Wave “a” of y) was a textbook five-wave impulse, which meant that once wave “b” was over near the resistance of wave iv of “a”, gold prices should plunge again in wave “c” to complete the entire pattern before changing direction once more. Five days later, on Friday, March 2nd, the hourly price chart of XAUUSD looked like this:

gold elliott wave analysis march 2

Wave “b” of y) topped out at $1341 and gave then gave the start of wave “c”, which touched the lower boundary of the channel four days later at $1302.68. It was Thursday. And what a coincidence, President Trump announced his steel import tariffs the same day to trigger the anticipated bounce, which sent gold to $1325 on Friday.

In our opinion, if it was not the tariffs, something else would have sent bullion higher, because the market appeared to have made up its mind a week earlier. The exact piece of news that triggers the move is not that important. What is important is the wave structure, which put us ahead of both gold’s plunge and subsequent recovery.

What lies ahead is even more interesting, especially if a global trade war erupts…


Stay informed with our newsletter

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

Privacy policy
You may also like:

Gold Prices Under Pressure Amid Easing Tensions

North Korea’s Kim Jong-un appears to have finally come to his senses. The isolated communist country announced it will discontinue its nuclear tests and close down its test site. The North Korean leader will meet with U.S. President Donald Trump in June to discuss the Asian country’s complete denuclearization. And while peace in Syria is…

Read More »

Silver Prices on the Verge of a Breakout

Silver prices spent the last year and a half locked between $19 and $15.19, unable to choose a direction and leave this range. The precious metal is still in its boundaries, currently trading around $17.28, but from an Elliott Wave point of view it looks like we are finally going to see a breakout. Bullish…

Read More »

Ahead of Gold’s Trade War-Inspired Rally

United States President Donald Trump announced import tariffs on approximately $60 billion worth of Chinese goods. China responded modestly by imposing tariffs on just $3 billion worth of U.S. products, but that was more than enough to spark fears about a global trade war. Investors apparently did not like how the geopolitical landscape is shaping…

Read More »

Gold Looked Bullish Days Before Inflation Report

Gold bugs had another reason to celebrate Valentine’s Day after the price of the precious metal had its best daily trading session since the Brexit vote in June 2016. XAUUSD rose to $1355 on Wednesday after higher than expected inflation suggested the Federal Reserve may be forced to increase the interest rate at a more…

Read More »

Gold Tumbles Despite Clashes in Jerusalem

It has been a bad week for gold bulls. The yellow metal has been trading in a range between $1260 and $1306 for over two months and many thought it was trying to find a base to bounce up from. Unfortunately, the $1260 support everyone was heavily relying on suddenly gave up, opening the way…

Read More »

Here is Why Gold Prices Turned Bearish From $1306

Gold’s last major bottom was formed at $1260.50 on October 6th, following a decline from as high as $1357. By October 16th, the price of the precious metal was up to $1306 for a recovery of over $45. But instead of continuing to the north, the bulls could not breach this barrier and fell pray…

Read More »

Elliott Wave Ahead of Gold in Both Directions

Last week was hardly the best one gold bugs ever had. The yellow metal declined from $1319 to a low of $1288, before settling at $1297 for the weekend. So it made sense to expect more weakness after the open on Monday. Instead, the bulls returned to lift the price to $1313.57 by Tuesday, which…

Read More »

More analyses