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Gold, Trump, North Korea and the Moving Stop Order

You do not need to be Sherlock Holmes to find a good enough explanation for the recent surge in the price of gold. On one hand, there is North Korea, whose hostile behavior and multiple missile launches show just how fragile peace really is. On the other, there is Donald Trump, who has never been afraid to say the first thing that pops into his mind, even if it includes “fire and fury like the world has never seen.”

Gold is still considered the be the ultimate safe haven asset to run to in times of political and economic uncertainty, so it is not a big surprise the price of the yellow metal rose from $1204 on July 10th to $1325 as of this writing. That is a 10% gain in less than two months. The problem is that for the purposes of trading, post-factum explanations are quite useless. Traders need to always be one step ahead of the market, in order to take advantage of the price swings. Our way of doing this is by analyzing the price charts through the prism of the Elliott Wave Principle. Here is how it works.

gold elliott wave analysis july 17

Over a month ago, before the market opened on Monday, July 17th, we sent this 4-hour chart of gold to clients, saying that “if $1241 is breached in bullish fashion, we could not only go long right away, but also put a stop-loss order right below the bottom of wave C of B) at $1204.”

It is true that the chart of gold was a real mess back then, so waiting for a confirmation was recommended. We thought gold has drawn a leading diagonal in the position of wave A), followed by the so-called double flat correction in wave B), where wave A of B) was a running flat itself. Once the bulls conquered $1241, the 5-3 wave cycle was confirmed complete and the door to $1300 was wide open.

gold elliott wave analysis august 14

Almost a month later, the above-shown chart was included in the premium analysis of gold sent to subscribers on August 14th. The price never really threatened $1204 and was already approaching the $1300 mark. We could now lock a small profit by moving the stop-loss order up to $1251, while still expecting higher levels. It was not meant to be a smooth rally, though.

gold elliott wave analysis august 21

By the time we sent the next analysis to clients on August 21st, $1300 was breached, but not as decisively as we hoped. The way to deal with gold’s slow progress was to move the stop-loss order up one more time – to $1267 and continue waiting. The positive outlook was also reinforced by a rising trend line. Here is how the situation developed in the next five trading days.

gold elliott wave analysis august 28

The price of gold barely moved the whole week. The chart above, sent to members before the open on August 28th, shows it slightly breached the rising trend line, drawn through the previous three lows, but $1267 survived and the bullish count survived with it. The small dip to $1276 allowed us to lift the stop-loss order once again. Finally, nearly a month and a half after $1241 was taken out by the bulls, $1300 gave up, too.

gold elliott wave analysis august 29

Gold prices started accelerating to the north from the first hour of this trading week. The solid resistance near $1300 finally surrendered and it feels as if sky is the limit for gold bugs. In the meantime, the Elliott Wave principle once again proved to be a powerful ally by guiding us through gold’s politically-charged rally. Let’s just hope the North Korea scare remains just that and nothing more. It is high time Donald Trump, Kim Jong-un and other world leaders understand they cannot play chicken with a nuclear war. The stakes are simply too high and there are no stop-loss orders…

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