close icon

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 for the bears to drag the price of gold to as low as $1244.

Fundamentally speaking, there was a pretty good reason for gold prices not to decline. Donald Trump declared Jerusalem the capital of Israel, causing outrage in the already destabilized Middle East. According to The Independent, Trump’s decisions risks uniting the Arab world against the United States, so one might think political and economic tensions are about to rise. Normally, gold is considered to be a safe haven in times of uncertainty, so it makes sense to expect its price to go up. Alas, common sense is not always a good ally in the markets.

Here is how the Elliott Wave Principle put traders ahead of the market once again. The chart below was sent to subscribers before the market opened on Monday, December 4th.(some marks have been removed for this article)

gold elliott wave analysis december 4

Instead of relying on external factors such as news and events, we pay more attention to price patterns. The one we recognized on the chart above is called a triangle. Triangles are continuation patterns. A triangle is nothing more than a correction, which temporary interrupts the larger trend. In XAUUSD’s case, the triangle in question was preceded by a three-wave (a)-(b)-(c) decline from $1357 to $1261. This led us to the conclusion, that once the triangle was over, the trend should resume to the downside. In addition, this pattern usually comes with a specific invalidation level. Wave (e) was not supposed to exceed the highest point of wave (c), so as long as gold was trading below $1299.50, lower levels were anticipated. The next chart shows how things went.

gold elliott wave analysis december 10

$1299.50 was never in danger. Gold prices headed south almost from the start and despite the fact that the tensions between Israelis and Palestinians in Jerusalem quickly escalated to armed clashes, the precious metal suffered its worst week since July. If it was not for the Elliott Wave principle, we too would be scratching our heads in bewilderment.



Stay informed with our newsletter

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

You may also like:

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’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…

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 »

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 »

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…

Read More »

More analyses