In the Market nothing is static. Everything is constantly changing. Traders can never be certain about the future. That is why they should always be prepared for more than one scenario.
More than four months ago, on July 3rd, 2014, we published “Gold, 1100 visible in the long term”, which showed you our big picture outlook on the yellow metal. Today, gold is trading in the zone of $1140, which means that our target has not been reached yet. However, the time seems to be appropriate for an update, especially in the market environment, where there is always more than one possibility. The weekly chart below will provide you with our big picture idea. It shows the whole bear market gold is currently in, starting from the top of $1921.
In our opinion, we are witnessing a huge triple zig-zag correction, labeled W-X-Y-X-Z. It looks like wave Z is still under construction. Complex corrections are never easy to solve, which is why we have to be prepared for at least two probable developments in wave Z. The next chart depicts the first one.
According to this count, the decline, which started from the end of wave X at $1345, takes the form of a perfect five-wave impulse. The Elliott Wave Principle states, that every impulse is followed by a three-wave correction in the opposite direction. So, if this is the correct count, we have to label this five-wave decline with “a” and then expect waves “b” and “c” as shown. Wave “b” would probably end around $1250, where the resistance of the former wave 4 stands. This is the area, which could give the start of the last move to the south in the face of wave “c”. The next chart looks very similar, but not completely.
This chart suggests, that the larger wave Z would become a w-x-y double zig-zag itself. If the Market chooses this scenario, gold could reach the target of $1100 much sooner, because the expected wave “b” recovery should be a shallow one, in comparison to the one on the previous chart.
Trying to guess which of the two counts will turn out to be the correct one is pointless, because both of them look equally probable right now. The only thing we can do is expect each one of them and adapt to the situation as it develops.
