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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 to the bears, who dragged gold prices to as low as $1265 as of this writing. What happened at $1306 and why did the bulls abandon their ambitions so quickly?

Two trading weeks ago, before the market opened on Monday, October 16th, we sent 7 analyses to our premium subscribers, including one of gold. The following chart was included.(some marks have been removed for this article)

gold prices elliott wave analysis oct 16

As visible, the decline between $1357 and $1260 was a simple (a)-(b)-(c) zig-zag with a regular five-wave impulse in wave (a) and an expanding ending diagonal in wave (c). After we took a look at the bigger picture on the daily chart, we though the recovery from $1260 was also going to be limited to a three-wave sequence. Since three-wave patterns are counter-trend moves, it made sense to prepare for more weakness once the recovery was over. The 61.8% Fibonacci level looked like a reasonable area for the bearish reversal to take place, so we suspected gold should at least climb to $1310. The bears did not think so.
gold prices elliott wave analysis oct 27
$1306 was the best wave (c) was capable of. After that, it did not take long for gold prices to start plunging. Ten trading days and over $40 to the south later, gold trades in the mid-$1260s. Thanks to the Elliott Wave Principle, this is not such a big shock, despite Trump-North Korea, Catalonia and all the other political reasons suggesting gold should rise. Because quite often, the price patterns are much more important than the news.



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