What wont wrong for gold? Ever since the precious metal bottomed at $1046 in December, 2015, it has been steadily rising. Six months later, in the beginning of May, the price of gold rocketed to nearly $1304. And just when everyone thought the rally was going to continue even higher, the bears decided they have had enough and stepped to the stage, causing a plunge to as low as $1218 so far. Of course, we could search for explanations in the Fed’s hawkish statements or the anticipated interest rate hike in June, but the same reasons were present while gold was rallying as well. In addition, that type of information is not going to tell us what to expect from now on. So, what went wrong? As the next chart will prove, nothing.
The above-shown chart was sent to our premium clients ten days ago – on Monday, May 16th, before the markets opened. By applying the Elliott Wave Principle, we were able to recognize a triangle in the position of wave 4. According to the theory, triangles precede the last wave of the larger sequence. In this case, the last wave was supposed to be the advance from $1227 to $1304 in wave 5. Once it was over, a bearish reversal could be expected. That is why, instead of telling our clients to “buy the dip”, we warned them that “as long as $1296 holds, we should expect to see a sell-off… The bears’ next stop should be the support near $1220.” The chart below visualizes gold’s developments since that forecast.
The price of gold initially climbed to $1288.60. Nevertheless, the invalidation level at $1296 was still intact, so all traders had to do is wait, since the bearish scenario was still valid. Yesterday, May 25th, gold fell to $1218, thus not only reaching the target at $1220, but exceeding it. This is another great example of the fact that the Wave principle not only prepares traders for the market’s next big move, but it also provides specific price levels to serve as a map during the process. Those, who relied on the old uptrend and bought gold, had to deal with a very unpleasant surprise. On the other hand, the minority of traders, who trust the Elliott Wave principle, must be very pleased with the results they got. Are you one of them?
What to expect from now on? Is gold going to continue even lower or the support near $1220 would turn out to be too strong for the bears to breach? Prepare yourself for whatever is coming. Order your on demand Elliott Wave analysis now or pre-order the one due out next Monday at our Premium Forecasts section. Stay ahead of the news in any market with the Elliott Wave principle.