The yellow metal will complete the first bullish month in 2021 after it bottomed at 1677 in March as a result of a falling treasury yield. Will the long-term bullish trend continue from here?
Gold is up by over 3.5% in April. The last bullish month prior was in December when the commodity gained nearly 7% to end the last quarter of the last year at near breakeven. However, overall, the metal is still suffering about 10% setback since August when this bearish phase started.
Gold long-term view – has the current bearish phase bottomed?
As the chart below shows, it’s very clear that the long-term view is very much bullish. Also, the current dip since August, after the price hit a record high of 2075, is a retracement of the bullish trend. We could see similar retracements in June-to-December 2016 when the metal declined over 18% and over 14% slump between March and August 2018. The current dip was 19% at 1677 low. The behavioral pattern is quite similar and the next surge should start toward 2400 if truly the bottom has already been achieved at 1677.
From the Elliott wave forecast above, we started the cycle wave degree from 1040. Wave V cycle degree started in December 2015. From there, we could see the emergence of a primary impulse wave degree in red. The surge to 2075 completed the 3rd primary wave and the decline that followed is the 4th primary wave dip. Most times, the 4th wave is not deep and often corrects to the 38.2% Fibonacci retracement of the 3rd wave – 1719 on the chart. Price cut below 1719 a bit and has now roared above it to show the significance of the mathematical level yet again. Also, the price completed a double bottom reversal pattern at 1677 and broke above its 1755 neckline. These are the first set of technical evidence that the yellow metal might have already bottomed at 1677 and the long-term bullish trend should take off again from here. The chart below shows the second set of evidence.
Gold’s intermediate wave cycle developing?
Oftentimes, when a correction has ended, the price would make a simple technical wave cycle. A cycle, in simple terms, is a clear trend followed by a correction that should lead to the continuation of the trend. The trend move is meant to take the market away from the corrective phase before the market test the resolve of the collective participants to resume the trend. In the Elliott wave terms, this is called a 5,3,5,3,5 – 5,3,5 development or 5-wave up and 3-wave down in a bullish trend. That seems to be what’s happening on the Gold price chart which is evident of the 1677 bottom.
The chart above shows how Gold is performing since the 1677 low. We have had the first clear impulse wave rally (5,3,5,3,5) which almost hit the 1800 psychological level. The current dip is clearly corrective (5,3,5) (a testing phase). We, therefore, can anticipate a bullish impulse wave development of the intermediate wave degree in blue from 1677 to complete the primary wave 5 (circled in red).
Focusing on the intermediate wave (2) (in blue), the current correction is expected to complete a double zigzag formation and might decline further to the 50-61.8% retracement of wave (1) at 1737 or 1723. This will most likely happen considering the current upward trajectory of the US treasury yield. Therefore traders should watch for a possible sharp rebound from the 1755-1737 zone. At the end of wave (2), intermediate wave (3) ( in blue) would be projected toward 1900-2000 in the coming months.
This is the general roadmap for the Gold market in 2021 and until 1677 is broken downside, I expect this to hold – not necessarily perfectly as projected but the direction of the long-term move should be bullish toward 1900-2000. The forecast will come later with both short-term and long-term regular reviews. Always check back for that.
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