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Gold Price Outlook is Favorable According to Elliott Wave Theory

Gold Price Outlook is Favorable According to Elliott Wave Theory

Jeremy Wagner, CEWA-M, Head of Education

Previously, we wrote about the potential for a 3rd wave increase and was bullish the yellow metal on September 17. This morning’s sell-off prior to the US non-Farm Payroll release tested nearly every point available to keep the 3rd wave interpretation alive.

There is another bullish wave picture entering the scene as well that calls for a move up towards $1200-1225.

Therefore, these are interpretations we’ll watch and as the market eliminates one possibility, we’ll focus on the other. For those not long Gold, here are two possibilities to enter the market.

First Market Interpretation

Market Condition: Breakout

Bias: Buy Gold

Entry: $1157 on a breakout higher

Stop Loss: $1130

First Target: $1245 where wave iii is 1.618 times the length of wave i

Second Market Interpretation

Market Condition: Trend

Bias: Buy Gold

Entry: Buy near $1110 on a dip prior to $1157

Stop Loss: Just below the September 11 low near $1090

Target: $1200-1225

(Click on the chart to zoom in; after zooming in, press the play button towards the right to set the market in motion)

We’ve been highlighting and anticipating a powerful 3rd wave move higher in Gold. As you can see above, if the Gold price does not accelerate higher such that prices eventually dip back towards $1110, then that shifts the larger wave picture to a less bullish outlook in the shorter term.

The second interpretation could be 5-3-5 zig zag higher where the ‘B’ wave is a bullish triangle. Should this second interpretation become the higher probability move, we should first see a dip back towards $1110 prior to $1170 which sets up a strong risk to reward ratio trade. We are anticipating that wave interpretation to eventually terminate below $1225 but only after another dip to $1110.

Retail sentiment is softening as traders turn more bearish. SSI as we write is printing +1.10 whereas yesterday it was +1.70. The number of long traders has shrunk by 21% since yesterday and short traders have grown in number by 30% compared to yesterday. This large of a short term shift in sentiment is near term bullish for Gold.

Kristian Kerr nailed the timing of a Gold pivot. See his piece below. He was calling for a turn at the end of this week which means a break outside of this week and last week’s range sets the table for the next move.

Suggested Reading:

Price & Time: Key Timing Week For Gold

To receive additional picks or articles on using Elliott Wave Theory, join Jeremy’s distribution list.


DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.