As expectations for rate hikes from the Fed have increased in recent weeks, gold prices have been punched in the gut. If the Fed follows through with an increased rate in December 2017, then gold, which pays nothing and is priced in USD, may be under continued pressure.

In our previous report, we highlighted a large triangle pattern that may be taking shape. Under this model, gold prices likely continue to correct further but we anticipate they hold above $1122.

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Gold Price Elliott Wave Count October 6, 2017

Gold Prices Might Get Temporary Relief

From an intraday perspective, we can count an impulse lower and we are seeing RSI divergence within the fifth wave. As a result, a bump higher may ensue to alleviate the oversold pressure. If a bounce develops, we are anticipating it to be a partial retracement of the September 10 October 6 down trend.

$1290-$1310 might be an initial zone of resistance. Any strength would be seen as corrective with the potential for another leg lower of similar size and length as the $97 per ounce down trend.

From a sentiment perspective, the ratio of net long traders has shot higher to +4.1. Sentiment is a good contrarian tool so with the majority of traders net long, we would use that as a signal to short. Follow the sentiment of live traders through our sentiment page.

The bottom line is we look for gold prices continue its trend lower towards $1204 in the ‘D’ leg of an Elliott Wave triangle. Do not be surprised if we see a pop up to $1290-$1310 but sentiment is flashing a bearish signal so any strength may prove temporary. The key level for this analysis is the September 8 high of $1357. Above $1357, we will need to reassess the Elliott wave count.

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---Written by Jeremy Wagner, CEWA-M

Jeremy is a Certified Elliott Wave Analyst with a Master’s designation. These articles are designed to illustrate Elliott Wave applied to the current market environment.

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