Gold Price Analysis: Elliott Wave analysis shows that prices could be heading towards $1600

Fundamental backdrop

There has been lots going on over the past few sessions with both the ECB and Fed giving us updates. Without going into a long-winded rant about all money being worthless in this environment, it seems that both of the worlds biggest central banks have confirmed their relative forms of QE are here to stay for as long as they are needed. This also includes previous rounds which are going to be reinvested. Despite this fact, the markets seem to be latching on the theme that the economies are going to reopen soon but the indices are struggling today. A mixture of month-end flows and a worse than expected US jobless claims number (3,839K vs Exp 3,500K) sent equities tumbling with all major EU and US bourses trading lower despite a fairly healthy Asian session. 

Some of the recent market rallies seem to have been based on hope. The Gilead Sciences drug seems to be having some positive test results but the fact remains that it may take some time for the drug to hit the mainstream and the economic hit from all the shutdowns may be bigger than analysts initial expectations. Despite this gold has fallen from best levels but if the price waves are anything to go by this could be the start of a downtrend. 

Italy have reported 1,872 new coronavirus cases vs 2,086.

The number of UK coronavirus cases rise to 171,253 vs 165,221 new virus deaths rise to 674 vs 765.

Technical picture

The price of gold has come off somewhat in recent sessions. The price has posted a new wave low taking out the USD 1692.38 support zone. More importantly, this means that the price has now made a lower high lower low formation on the hourly chart.

This is highlighted in the chart below, which also confirms a bounce off the 76.4% Fibonacci retracement level (slightly deviated over). This means that overall this could be a new Elliott Wave formation to the downside and the price could be in the 3rd wave. The rule for the 3rd wave is that more often than not it is the longest but it must not be the shortest.

That puts the 161.8 downside target just above but close to USD 1610.00. On the flipside, if the price moves higher and breaks the USD 1720.00 wave high the pattern could be negated. At the moment though the bears look to be winning the battle.

The key support level is now at USD 1661.18, this is the wave 1-2 low this would also need to be broken to confirm that we are indeed in a wave 3 to the downside. Keep a close eye on how the price reacts there as it could confirm the bearish bias. 

Additional levels