With Gold prices breaking above $1170 per ounce, this elevates the Elliott Wave Theory wave 3 interpretation and lowers the probability of an immediate sell off. If this wave 3 outlook stays on track, Gold price would continue to rally higher towards $1245.
There is another wave picture that is a modified look of the zig-zag mentioned on October 2. That picture essentially calls for this move higher to be a wave 4 of a bearish ending diagonal. More commentary for both of these counts is towards the bottom of this article.
First Market Interpretation
Market Condition: Trend
Bias: Buy Gold
Entry: Near $1170
Stop Loss: $1157
First Target: $1195 where several wave relationships show up
Second Target: $1245 where wave iii is 1.618 times the length of wave i
Gold Price Outlook – Break Above 1170 Opens the Door to $1200
Created Using TradingView Chart
We’ve been highlighting and anticipating a powerful 3rd wave move higher in Gold since September 17. As you can see above, Gold is finally acting like it is in wave iii of v higher. If so, prices should get close to $1245 before finding meaningful resistance. The stop loss on this type of a play can be set at the former swing high of $1157.
Any good trader is going to consider the alternatives as it helps frame the risk. The alternative Elliott Wave picture we are watching is that this move higher is a W-X-Y double zig-zag (see the alternate labels on the chart). This pattern has tight wave relationships showing up near 1195-1198. This double zig-zag would then make up wave 4 of a larger bearish ending diagonal. Therefore, the behavior of Gold near 1195-1198 will indicate which pattern is higher probability.
As a result, we have the first target listed as 1195 which is a 1:1 risk to reward ratio compared to the entry.
If a break higher above $1200 develops, then we will likely visit $1245.
Retail sentiment supports further bullish momentum as retail traders are currency short to the tune of twice as many traders are short than who are long. SSI acts as a contrarian signal and suggests further gains are likely for Gold prices.
Suggested Reading:
Gold Price Outlook is Favorable According to Elliott Wave Theory
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