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Gold is going up right? Err?

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Conventional wisdom has it that Gold is going UP, UP, UP, although there are people who think it is still overvalued, and of course the perennial stock bulls...  Post Brexit we will see financial meltdown right?  "Just look at the markets!" shout hysterical Remainers.  Well actually it is not looking like a meltdown at all just now is it?  Elsewhere I have posted analysis, which points to a US led rally in stocks to fresh all time highs before any meltdown.  So far we may be getting a relief rally on FX preparatory to a major drop but crucially none of this has much, if anything, to do with Brexit.  It is about fundamental weakness in the global economy and market manipulation by the central bankers.

 

So Gold is going up?  Yes and quite probably to all time highs but maybe not just yet.  If you really want to speculate on Gold then buying actual physical gold could be a decent way to go right now as any short term devaluation will not harm you but trading is all about timing as we all know too well...  My long term time-frame analysis suggests to me that Gold may have reached, or be about to reach, a wave 1 top, which would then be followed by a wave 2 retrace.  If you look at the Weekly and Daily charts below you will see the potential Wave 1 tops (purple) and the internal EW counts that supports this view.  There is a possibility of one more leg up, maybe to touch closer to the Weekly chart Fib 38% from the all time highs (see Daily Chart) but then it looks likely that a retrace back to at least 1200 area will then happen.  A touch on the Weekly tramline (purple) at around 1,800ish is also a possibility but too early to speculate on that just yet.

 

This would all correlate nicely to a short rally in stocks and other commodities and then the wave 2 turn in Gold would equate to the end game for both of the other sets of markets (end of July/August???).

 

So my aim is to get confirmation of that wave 1 turn and Short to the 1200 area and then see where we are with respect to other markets but if going according to forecast a large Long play is on the cards.

 



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No one got a view on Gold?  COT data from last week shows unprecedented net Longs in the non commercial side as traders pile into to the post Brexit mania.  But the World has not stopped turning and stocks rallied beyond pre Brexit levels so a reversal of Gold must bee on the cards.  My previous analysis as posted still stands and in fact the market is showing us a final leg up just now, which would complete a 1-5 up into my Short zone.  The retrace down should be significant enough to take a Short position.

 

Similar picture on Silver. 

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Gold has arrived at my potential turning point (1380ish) and just in time for FOMC...

 

At this point I expect a further leg up but anything can happen at central banker statement time...  I think  a close below 1350 on the hourly is a bearish move.

 



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Hi 

 

I am long on Gold and I think it might retrace 1340 and then go up to 1450.

 

I respect all of your analysis, but I do not think that Elliots waves (which most people cannot agree on where to put those numbers) is just not enough to understand gold. 

 

I think Gold is mostly about fundamentals. World economic outlook is not good, most bond yields are negative, US rate hike maybe 6 months away, not enough supply for demand from ETFs, Central banks...

 

I think Brexit will really hurt EU and UK (EU will make sure of it). FTSE100 is not reflecting true UK future outlook, most of the companies have USD income or not GBP. So when GBP went 10% down, their earnings rise around 7% in terms of GBP for the short term. For mid term, they will go down as well when Brexit start to heart real UK economy not just GBP.

 



 

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That is all fine  and it is very OK not to agree, in fact it is great as it means we can discuss the situation (not trying to win and argument as the market is the ultimate judge).  I agree with the backdrop you have painted in the main, especially insofar as the long term outlook for Gold is a massive Bull run off the back of a massive bubble bursting crash everywhere else.  If, or really in my view when, that happens then no asset will be safe and the only Long trades would be Gold and USD in the mad panic rush to safety.

 

However we are not there yet so my comments regarding Gold are for a short term retrace until the above scenarios begins to emerge.

 

With respect to my analytical method, it is not just about Elliott Waves, which I agree cannot be accurate (but then again what is?).  I use them as indicative only and update my positions as more price data emerges.  I chiefly rely on tramlines to show trend and Fibonacci retrace to show areas of support and resistance then look more deeply into those areas to try and find high likelihood turning points.  In addition I am contrarian when it comes to looking for those major turning points and the one biggest factor in this is sentiment, which is the key driver of the market.  Right now the Commitment of Trader data is off the charts bullish on Gold.  This supports my contrarian view that Gold is likely to get a significant retrace, well this and my view that we are not yet at the tipping point for a massive Bull run, that requires a catalyst and Brexit isn't it.

 

Regarding Brexit, it is more of a political issue than a financial one.  The EU and Eurozone in particular, has been struggling in terms of the economy for some time (hence all the ECB policy nonsense) but the UK has actually been doing alright (in relative terms as no one is doing alright just now).  The issues for GBP were there already without Brexit, GBP has been in a Bear run for several years and this is only a continuation.  The Media try to find reasons that are easy to pin things on and it is good for selling newspapers and ads if the bring up Brexit but it is all nonsense.  In the UK we are tired of it and just want to get on with the exit now.  Long term it will turn out to have been an excellent decision as the EU implodes.

 

One thing about your fundamentals argument is US interest rates.  If they do go up that puts negative pressure on Gold, which is thriving on a low interest environment.  Having said that I do not believe we will see interest rate rises in the US, in fact we may see the reverse as the global economy continues to decline.

 

Therefor my net argument is for a significant retrace in the short term that is a precursor to a massive bull run.  You have to always bear in mind that markets do not move in straight lines and you can be right about the long term but wrong in the short term.  The strength of elliott wave theory is allowing the analyst to decide where the market is in its long term cycle, if you get it right.  The trick is how to trade that in the short term of course...

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Well sad  , happy to find someone like you to share the ideas ! We are grown adults who try to look from different eyes with positive discussions. In the long run, only the market is right...

 

As you sad, knowing the long term is not just enough, the key is managing the short term risks which I am not soo good at it:) 

Today movement between 1335-1370 was phenomenal, they just made some clearance before going to 1400 I quess. 

Thanks God I had reverse positions to bring down my avg, sell around 1360 and buy around 1340:)

 

PS: US rate hike which is not good for gold for sure, I mean it is at least 6 months away so I do not expect a big retrace other than 1340 at the moment. There is really huge demand for gold, ETF holdings passed the 2000 tonnes first time since 2013. 

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I see what you mean re US rates now  and agree.  My feeling is we get a final leg up now before a significant retrace.  I think that happens regardless of US rates, maybe behind renewed and misplaced optimism after NFP?  I think this will be short lived and as stock markets top out Gold will come back into favour and go on an incredible bull run.

 

Commitment of Traders has hit unprecedented levels of bullishness (at least since 2007).  If everyone is bullish then there is no one left to sell and the market topples over, this is the essence of contrarianism.  There is little to sustain this gold bullishness just now so I see a retrace and then we will see a catalyst for mayhem.  I remain Long gold but not for long and then I will stalk a major long play after a decent pullback.

 

However unlikely, if we do get a lower high in the next day or so then the turn down is already in so I am also prepared for that scenario.

 



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Hi 

 

Looks like Gold started to follow your analysis. Could you share your current view with expected turn points ?

 

Why do you think that wave 2 will be that much lowe or wave 5 finalised ?

 

Cheers!

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Will have to look at this one a little more closely, perhaps at the end of the week.  I am a little annoyed that I didn't catch the move down.  I did spot a potential double top but couldn't see a good divergence case to back it up, except on the 4 hour chart, and was looking for a higher high to complete divergence.  At face value it does now look like my retrace scenario is in play but there may yet be another rally higher to complete the move up.  I guess a drop off in Gold is consistent with a strong rally in stocks but again I need to look at the whole picture together now that we have indeed seen new all time highs on US large caps.  I tend to do this at the weekends when things are quiet.

 

For now my snapshot view (not well analysed) is that this drop could be a wave 3-4 retrace that could terminate around 1320 followed by another rally up.  I will have to get a bit more time to look into and further price data to take my thinking further.  As a result I am not in Gold until I can get further clarity.

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  I managed to get to a updated analysis of Gold a bit earlier than I thought.  As mentioned already I missed the double top opportunity and that could indeed be the top of this rally BUT I have a preferred scenario that suggest one more leg up as follows:

 

The whole move up on the daily chart looks like it is missing a final leg up to the 1400 area.  The double top was close and so I can't absolutely rule that out (I can make a that scenario work) but no Neg Mom Div on the daily is a problem and I can easily rationalise another higher high to give us that Neg Mom Div.

 

On the 4Hourly there is indeed a Neg Mom Div but to me this looks like a short term retracement rather than a major motive wave end (again I'd like to see a Daily Neg Mom Div for that.  Currently the move down is shaping up like an A-B-C and until it resolves into a motive wave (with a retrace and further drop) then I remain with the final leg up scenario as the most likely.  If this is correct we should see a wave 4 termination and turn back up at the Fib 38% (also coincides with the Wave 4 -green - of the previous motive wave up) around the 1310 area.  If we see a turn at this point (also good Support zone) with an A-B-C form then I would be more confident that a final leg up is on the cards.  After that my previous suggested scenario of a major retrace before a major wave 3 bull run comes into play.

 

Right now on the hourly chart price is rallying back up towards the recently broken tramline (brown) which could offer a short term short for day traders down to the Fib 38% before the medium term Long comes into play but the big one is the large retracement.  If price breaks through support at 1310 then the double top was the top and the retracement will continue down much further before the big bull run.  Clearly the medium term trade to get in on is that bull run when it emerges.

 

I also suggest that this Bull run on Gold will correspond to a confirmed turn on stock supporting an all time high top on US large Caps.

 

Thoughts anyone?

 



 

 

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Apologies, I should have pointed out that technically the Wave 4 (blue) could already be done.  On the hourly chart there is a small Pos Mom div and a possible completion of an A-B-C and a break back up through that tramline would confirm that scenario.  The next day or two should tell the tale.

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Some great analysis Mercury. Are you in Gold yet?

Do you think a drop in UK base rate tomorrow might be a catalyst of some sorts?

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Hi , I did take a cheeky short on the 14.00 hourly price bar when it touched the Fib 38%, just short of the tramline touch but this is not to say I expect a major drop, that is possible and so I wanted a marker in but I still think a rally back up is on the cards before a more significant shorting opportunity.  The big opportunity is, I feel, a long when we get a significant retrace down (I mean down maybe as low as 1200 again)  A long there will be the big trade to stalk.  Anything else before that has to be treated as short term and therefore highly risky.

 

Let's see how it evolves and as  often reminds us, let the market tell us where it is going. 

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This whole scenario playing out is a once in a life time opportunity in my humble opinion. Call the plays right, either long or short, in sync with the market as much as possible, and reap the benefits.

 

Really don't want to miss the boat this time around. Be it shorting/buying gold, shares etc!

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I understand that  and agree but a word of caution.  Don't let that emotion cloud your judgement.  Fear of missing a "great" opportunity is the graveyard of retail traders.  Let your analysis and the price action guide you and above all deploy your risk management methodology rigidly during this time.

 

Remember the old saying, there is always another trade tomorrow!

 

If you have no yet done it check out the video interview of Anthony Crudele posted by   It should be mandatory viewing for all retail traders in my opinion.

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Gold retrace is shaping up nicely into an A-B-C form just now with a bounce back down off the Fib38% and near a tramline touch.  I expect a break below the recent low and then there are 2 possible Wave C termination points.  After that either a drop through to negate the A-B-C and turn it into a stronger move down (which would prove the double top was the top of the rally) OR another rally leg up to the 1400 area to complete the large scale bull rally.  Could BoE today be a catalyst to resolve this?

 

 

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Could be getting a turn on Gold now it is at the first of my 2 rally points.. If stocks take a dip even in retrace then Gold could catch a bid.

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