Gold prices continue to hover above previous lows area at 1180-1200$. For some time now we have been targeting 1140-1080$ as the target of the recent Head and Shoulders pattern that is unfolding downwards. Trend remains down both in short and long-term as prices continue to make lower lows and lower highs. The chances are in favor of breaking the 1179$ low and reaching 1080-1100$ area. Our longer term view regarding Gold remains bearish as we believe that a big downward correction has started. The decline from 1900$ does not have an look and therefore my preferred scenario is that the decline is only the first part of the correction, with ultimate target prices below 1000.
The current decline in Gold has reached the 38% Fibonacci retracement of its entire upward move from 250$ lows. This is an area of support that could justify the end of a bigger degree wave A and the start of an upward wave B towards 1600-1800$. I believe the corrective phase is far from over, but this doesn’t mean we cannot trade the anticipated wave B up.
As mentioned above, we feel it is very possible to see Gold prices make a new lower low towards 1140-1080$ as this is the Head and Shoulders target. If wave c of A is not complete yet, we will get confirmation by breaking below 1179$. On the other hand, many elliotticians have shown increased confidence in the rise from 1179$ to 1433$ as they label it impulsive. This implies that the low is in and that a new upward move is at its beginnings. The impulsive wave scenario from 1179$ to 1433$ is only canceled if prices break 1179$. So bulls have a clear stop-loss level. On the other hand, bears that expect the correction to end near 1140$-1080$ have their own stop-loss too. Breaking above 1325$ and 1360$ will increase the chances for the bullish scenario and this break out will be sign of bullish strength. A break above 1325$ and 1360$ will help bulls raise their stop to 1210$ and become more confident that the low at 1179$ is going to hold.
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