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Gold prices bounced higher off the 78.6% retracement level near $1215 on May 9. Continued strength from this bounce may push gold prices up towards $1260.

We identified in Gold Prices Find Support and analyzed that the down trend was limited and that the up trend appeared to be incomplete. This implies that we are likely to see a new high above $1300 prior to see a new low below $1122.

Gold Prices Bounce Higher with an Eye Towards $1260

Using Elliott Wave theory as a model, it appears gold prices are still stuck in a large ‘B’ wave pattern. The bounce from $1215 leans the pattern towards a ‘B’ wave triangle. If that is the case, we may have just finished the middle portion of the triangle with a few more weeks of sideways chop to go between $1195 and $1295. Once the ‘d’ and ‘e’ legs of the triangle are complete, then a larger bullish opportunity exists using the ‘c’ wave low as risk.

The model suggests that if the ‘d’ leg is underway, look for gold prices to move higher towards $1260 and possibly to $1280. We anticipate that prices would hold below $1295 before another pull back begins.

Fed fund futures continue to price in a rate hike during the June meeting. However, an additional hike for December 2017 does appear to be pushed back into 2018. Read our Q2 Gold forecast and see how interest rate hikes may affect gold prices.

The IG Client sentiment reading for gold is at +5.61. This reading suggests the vast majority of retail traders are net long and the market is at risk of a pull back. Follow this live reading and learn how to trade with sentiment at this link. If the market pulls back and if $1195 level does break, the triangle pattern is negated and we shift towards the previously mentioned flat pattern (right side in the picture from the previous article).

---Written by Jeremy Wagner, CEWA-M

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Read the recent EUR/USD Elliott Wave article.

Read the recent GBP/USD Elliott Wave article.

Read the recent USD/CAD Elliott Wave article.