Gold stumbles from recent highs

Executive summary

• Trend bias: Gold (XAUUSD) appears to be in the beginning stages of wave ((c)) lower.
• Key levels: Slight bounce to $5,258 possible, but bearish down to $4,402.
• Bearish view while price holds below $5,410.

Gold has trended higher since finding a low on February 2. The conflict in the middle east hasn’t appeared to move gold higher. As we’ll see, the pattern has developed into a bearish structure.

Current Elliott Wave analysis

Gold has been in rally mode since finding a low on February 2. The rally has taken the structure of a corrective bounce in Elliott wave terms. This means the rally is likely to be retraced in the coming months.

The current Elliott wave count we are following is that wave ((b)) of a larger zigzag decline topped on March 2. Next, would be a decline in wave ((c)) of the zigzag.

We know from our Elliott wave studies that C-waves tend to be 5-wave motive structures, unless it is the C-wave of a triangle. We can’t say for sure if this is a triangle, so I’m leaning towards this structure as a larger bearish zigzag.

It appears wave (i) of ((c)) is complete and the sideways range since March 3 is wave (ii).

Gold prices may bump slightly higher to $5258, the 61.8% Fibonacci retracement of wave (i), but it doesn’t have to.

Once wave (ii) exhausts, the wave (iii) would push gold lower to retest $4,400 and possibly lower levels.

Our previous forecast on February 3 essentially worked out, though the rally was slightly higher than anticipated. The top end of our forecasted rally was $5,316 and gold prices reached $5,419.

The next decline for gold should be more aggressive as it would be a third wave or C-wave.

Bottom line

Gold appears to be declining in wave ((c)) of a larger bearish zigzag. Though a near-term bounce to $5258 cannot be ruled out, the larger trend appears to be pointed lower to retest supportat $4,402.

If gold prices rally above $5,419, then we’ll reconsider alternative wave counts.