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Gold with two short-term bearish counts

In our previous analysis of gold we were expecting an upside thrust from a fourth-wave triangle to lead prices to 1327 in wave 5, followed by a temporary reversal in wave “B”. When this forecast was published gold looked like this:

predi gold -triangle

On the next chart you will see how the situation developed as well as the first of two bearish counts we think gold is likely to go according to from now on.

gold c1 29.6.14

As visible, gold did not reach 1327… it went only to 1326. The expected three-wave decline started soon after, with gold falling to 1306. The only reason we do not consider the whole pattern as a completed 5-3 Elliott Wave cycle is because this three-wave retracement is far too small and shallow compared to its corresponding impulse. That is why we expect it to extend either in the form of an expanding flat or a double zig-zag correction. The first scenario is shown on the chart above. According to it, we should prepare for a fake breakout above the top of wave (A) at 1326, followed by a strong decline in wave C of (B). The second count is also bearish and it does not include a new top. You can see it on the chart below.

gold c2 29.6.14

Simple zig-zags can always extend into double zig-zags. Double zig-zags can always extend into triple zig-zags, but that is another story. Since we have a completed simple zig-zag on the chart above, but it is a small one in terms of retracement percentage to the impulsive wave before it, we can presume that it will develop deeper in wave Y of (B) down. In conclusion, we still expect lower prices from gold to finish wave (B), before the uptrend actually resumes in (C).

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