Gold’s reputation as a safe haven in times of financial turmoil was tarnished on Friday as the growing panic about the spread of coronavirus infections outside China saw the precious metal suffer one of its worst one-day drops on record.
While the coronavirus is the major headline for the shock and awe in gold, the chart has already presented a pattern that suggests a possible sell-off. And last week's decline could be the beginning of a massive sell-off according to Elliot Wave Principle.
Elliot Wave Analysis
The decline from $1920.10/oz in September 2011 to as low as $1044.92/oz in November 2015 can be seen as a complete impulse pattern. The five waves are labeled 1-2-3-4-5, where wave 4 unfolded as a triangle and wave 5 in an ending diagonal.
The recovery from $1044/oz in 2015 to as high as $1688.72 an ounce in February 2020 looks like a simple A-B-C zigzag correction with a running flat wave B. According to the Elliott Wave theory, impulses point in the direction of the larger trend. Once the corresponding three-wave retracement is over, the trend resumes.
In Gold's case, we have an impulse to the south followed by a correction. If this count is correct, there is a complete bearish 5-3 wave cycle.
Verdict
This means that instead of joining the bulls now, investors should remain cautious. The anticipated decline has the potential to drag Gold below wave (A) low around $1044 an ounce. With the yellow metal currently trading at $1585.40/oz, this translates into a 33% slump, maybe more.
Note
This is a longterm view on Gold. It takes wave (A) around 5 years to complete the bearish impulse, so we could anticipate this move to unfold in the next 3-5 years.
What's your thought on Gold? Can we see $1000 again?
While the coronavirus is the major headline for the shock and awe in gold, the chart has already presented a pattern that suggests a possible sell-off. And last week's decline could be the beginning of a massive sell-off according to Elliot Wave Principle.
Elliot Wave Analysis
The decline from $1920.10/oz in September 2011 to as low as $1044.92/oz in November 2015 can be seen as a complete impulse pattern. The five waves are labeled 1-2-3-4-5, where wave 4 unfolded as a triangle and wave 5 in an ending diagonal.
The recovery from $1044/oz in 2015 to as high as $1688.72 an ounce in February 2020 looks like a simple A-B-C zigzag correction with a running flat wave B. According to the Elliott Wave theory, impulses point in the direction of the larger trend. Once the corresponding three-wave retracement is over, the trend resumes.
In Gold's case, we have an impulse to the south followed by a correction. If this count is correct, there is a complete bearish 5-3 wave cycle.
Verdict
This means that instead of joining the bulls now, investors should remain cautious. The anticipated decline has the potential to drag Gold below wave (A) low around $1044 an ounce. With the yellow metal currently trading at $1585.40/oz, this translates into a 33% slump, maybe more.
Note
This is a longterm view on Gold. It takes wave (A) around 5 years to complete the bearish impulse, so we could anticipate this move to unfold in the next 3-5 years.
What's your thought on Gold? Can we see $1000 again?
