Gold Elliott Wave: Taking a Breather

Current Elliott Wave Analysis

Gold continues to punch new all time highs this new year.

The current Elliott wave count suggests that the current wave 5 rally is incomplete with only wave ((i)) of 5 completed at today’s high.

This implies gold may need to catch its breath from this climb and a mild decline in wave ((ii)) of 5 may be underway. This second wave can drop down to $2760-$2830 and be considered a ‘normal’ decline. Once the wave ((ii)) decline is complete, then a wave ((iii)) rally would begin pushing gold up to another all-time high.

How Do We Know This Isn’t the Top of Wave 5?

Elliott wave analysis is a deductive study. All wave patterns are possible, then we eliminate those patterns that break one of Elliott’s rules. Of those patterns that remain, we analyze them based on best practices that meet the most guidelines and has a ‘right look’.

It does appear that wave 4 was a triangle. The rally from January 13 has carved out five waves into today’s high. Therefore, it is possible today’s high is the end of wave 5. However, we don’t believe it is the higher probability model.

Though prices have rallied into the orange trend line extending off previous pivot highs, the RSI indicator is hinting at higher levels to come (eventually).

Typically, we’ll witness divergence between the price and RSI when comparing a wave 5 peak to its corresponding wave 3 peak. Today’s RSI value is not diverging from the wave 3 high. Therefore, we can label today’s high as a wave ((i)) of 5. The next wave, wave ((ii)) would need to hold above the January 13 low of $2,656.83.

An Alternate Gold Count to Consider

The rally into today’s high rubbed along a trend line dating back to 2023. This may repel prices, even though the pattern appears incomplete.

We mentioned above how today’s high could be the end of wave 5 and the entire impulse dating back to 2022. However, there is another possibility we are closely monitoring that suggests a larger decline is about to unfold back to about $2,500.

Under this model, wave 4 is still incomplete. Today’s high would be wave ((b)) of 4. A decline to about $2,500 would become wave ((c)) of 4.

This would bring wave 4 more in line with the price and time correction of its cousin, wave 2.

You see, the first wave count I shared above included a wave 4 triangle that was shallow in price and time when compared to wave 2. Therefore, we are keeping an open mind about what pattern could extend wave 4’s time and depth and the red labels shown above would do that.

Bottom Line

Gold appears to have an incomplete Elliott wave sequence to the upside.

Multiple models suggest a decline to $2760-$2830. From there, the models diverge with one Elliott wave model suggesting a rally to new all-time highs, while another model suggests a continued decline back to $2,500. At $2,500, wave 4 would complete and wave 5 unfolds to new all-time highs.

Either way, we are anticipating new all-time highs to develop, but starting from lower levels.

Short-Term Bias: Bearish

Long-Term Bias: Bullish

Key Level for Bullish Bias: $2,500

Initial Target: $3,400