Gold Loses Its Shine for Long Term Investors

This entry was posted by Saturday, 13 April, 2013

My last update on Gold reaffirmed my long term bearish position following the expected mini rally. Bulls failed to take out the key level at 1626 on that rally and it was enough for me to take profits and reverse my position to short again as the shorter term cycles rolled over and the larger down trend resumed.

This was a long term call and I expected a break down through 1585 to trigger a swift decline to 1550 and then on to test the long term support with the expectation that it would also break. As we can see in the updated chart, Fridays break lower has given a clear and decisive break so lets take a look at the chart and what we can expect to happen now?…

 Gold Loses its Shine for Long Term investors

Gold Elliott Wave Analysis 12 April 2013

 

The updated daily chart shows that Fridays chunky drop was on well above average volume and the break down through the key long term support level in the 1520’s has accelerated the declining trend channel. Price dropped to the projected lower trend line where is settled into the close but there is nothing to indicate that this low will provide much support and we can probably expect the market to push prices lower, steepening the channel further before a larger back test of the break can take place.

As always, there are a number of valid ways to count it but, the Blue Elliott wave count shown sees the acceleration of the trend as an extension of the 5th wave within a larger 3rd. Any push lower to complete the 5th wave this week is likely to be more of a grind as the bears struggle against the support offered by the channel trend line. Once complete, we can expect a larger 4th wave to back test the break of 1520.

Optimistic bears will see a more complex series of 1-2 waves and will see Fridays break lower as the beginning of a 3rd wave indicating a steeper decline in the short term than I am suggesting here.

On a long term note, we can see that the break of 1520 has also broken the long term channel support and price has dropped back into an even longer term rising channel dating back to the 99/2000 lows.

Weekly Gold Elliott Wave Analysis

Long Term Gold Elliott Wave Analysis

 

This chart indicates that unless bulls can recover 1520s, a test of the next major long term support on the lower channel trend line looks very likely to be where this market is heading.

 



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