Gold from an Elliott Wave Analysis Perspective

EagleFX Team EagleFX

The price of Gold erases its gains made on Tuesday when it reached the highest level in two weeks, after the fear of the spread of a coronavirus in China that currently has killed at least four people.

Gold drops about $10 or 0.64% stumbling to $1,550.90; Silver eases 35.9 cents or 1.99% dropping to $17,707 per ounce, Copper drops 3.47 cents or 1.22% descending to $2.80 per pound.

Asian and European markets tumbled on Tuesday, driven by fears of the spread of a new virus in China, which could develop as an epidemic over the Chinese Lunar New Year holidays.
Despite these fears, the price of Gold wiped out most of its profits and turned negative as the European and American sessions progressed.

Technical Overview

The yellow metal in its daily chart is developing a consolidation movement. This movement began after Gold reached $1,611.49 per ounce on January 8, 2020.

The big picture of Gold shows the price moving in a fifth wave that is still in progress. The impulsive movement that is active began on November 12, 2019, when the price reached $1,445.70 per ounce.

Thus, as long as the price action continues to move above $1,445.70 per ounce, the precious metal will maintain with a bullish bias.

The following chart shows Gold in a 4-hour range, developing a sideways movement bounded between $1,536.01 and $1,568.69 per ounce.

After the vertical advance developed by the price during December, and based on the principle of alternation, we expect Gold to advance in a complex consolidation structure. This structure could be, for example, a triangular formation, or a combination of simple structures.

The latest CFTC report released last Friday revealed that institutional traders continue having a bullish sentiment in Gold futures. However, the institutional net positioning reduced by 0.95% compared to the previous report.

The figure reveals that the extreme net positioning could be indicative of taking profit activity. In other words, the price action should look like a consolidation formation.

This activity could be confirmed with the side positioning reported by institutional traders, which reaches 86.75% in the long-side.

In conclusion, because the yellow metal is entering a complex corrective formation, our vision for the med-term remains neutral.

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Author

EagleFX Team

EagleFX

EagleFX Team is an international group of market analysts with skills in fundamental and technical analysis, applying several methods to assess the state and likelihood of price movements on Forex, Commodities, Indices, Metals and

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