Gold: Inflation Is Accelerating

Courtesy: Ticker Tocker

Coming down to $1800 is a critical level. Gold has come down about 50%, a Fibonacci retracement, from $2089 back on August 7, 2020. We are tapping into the Buy 2 level of the daily, which is at $1799. The first target above is $1817, which is the Buy 1 level.

When the VC PMI daily and weekly levels match, it is a harmonic alignment. If the market reaches those levels, the probability of a reversion to the mean is much higher. Since we are trading below $1825, that weekly level has now become resistance. The monthly Buy 1 level is $1846, which has become resistance, too. If we close above $1846, it will activate a bullish monthly trend momentum. We may get a short-covering rally or a new trend signal. The market’s sentiment has turned extremely bearish.

We are trading under the 200-day moving average, which is an indication of the long-term sentiment of the market. When the market reaches those averages, that is the time to cover the previous trend. If gold comes down to that 200-day moving average, then the pattern from above is completed.

For the monthly VC PMI signals, the Buy 2 level is $1812, so the market is very oversold. If we close above $1812, we will activate a monthly buy trigger. It will also activate again the annual bullish price momentum, which is at $1810. If we look at the 9-year cycle, the average price is $1675. The Buy 1 level of the 360-day cycle is $1532. Since the market is trading at these levels has brought into play the levels below. The market is likely to revert from these levels to go back up as buyers are identified and to close above $1812.

For the December gold contract, we have entered into the blue zone where buyers are likely to come into the market. According to Elliott wave analysis, a second wave correction will be completed at 1740 - 1750 levels. This could be the beginning of the third wave. The high we made in August from the low of $1450 is the first wave. The first leg was about a $600 move up. Then the market consolidated after the high was made, which is considered the second wave. If we look at Fibonacci retracements from the low of $1450 to the recent high $2089, then we have a 50% Fibonacci at about $1771. That usually satisfies the completion of the second wave. We do not think that the market has shifted from the picture of a big bull market. We are looking at a historic gold market unfolding. If we expand this pattern and use Elliot wave counts, after the second leg correction, the third leg can be double the first leg. The second leg is usually within a 50% retracement or less. Once the bottom is identified, we could be looking at a $1200 move with $3000 gold as the target on the third Elliot wave.

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Disclosure: I am/we are long GDX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from SA). I have no business relationship ...

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