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Market Report: Gold to Go to $700 or $3000

That's the question that Gold traders and investors are asking themselves.

Gold has now reached a climax point that long term traders get to really find out if Gold is still in a bull market or finally in a long term bear market.

No matter how you look at it, Gold has been in a bear market for the past few years, whilst long term you could argue its still in an up trend, I think the decision about the direction of Gold being in a long term bull trend is about to be decided shortly.

In my opinion Gold going to $700 or $3000 will come from this area $1250-1300.

Let's face it, unless you have been living under a rock or something the funnymental guys have been completely ripped apart in their thesis that printing money equals Gold going higher.

But rather than face the choice of exiting long side positions at a loss they have made the classic trade mistake of adding to positions and doubling down, (trading mistake 101) and then praying that their thesis eventually works out, so much for the funnymentals, then rather admit they got it wrong, they come out with the Gold conspiracy stories about the bank cartels smashing it lower.

I am not suggesting there is not any corruption in the markets, but the fact that we trade price is all we need to know, as no matter if a market goes up or down, the trader/investor that understands this concept can take advantage of the markets.

Even if being short is a hedge against your physical long positions, it's got to be better than trying to talk a market higher and following a bunch of gold investors that have been caught long and big time loosing $$. Patterns will help decide entry and exits points in a market, NOT the funnymentals.

I think it's about time Gold bulls owned up to the fact they got their thesis wrong.

But I know they won't ever admit that, as that's going against any fundamental principle.

The dark side of technical analysis is always wrong? Or is it?

I hope readers of this article finally see the light and come over to the dark side and use technical analysis for your trading and investing, the fundamentals have no part in my trading ideas and nether should it be in yours.

Up or down it really should not make any difference, as long as you have access to take advantage of price action, making $$ is the basic concept of why we trade.

Getting back to the ideas.


Bull Case

The market needs to make a stand here and the bulls need to step up, or the market is in serious trouble and the long term trend is about to be confirmed as being broken.

Gold Bullish Case Chart 1
Larger Image

I was initially looking for a pullback to around the $1500-1550 area, but that "take down" or whatever it was called, clearly decided that there was something else on the agenda. As I suspected it was in wave 4, as soon as the market broke down under $1550, the 38.2% retracement came into focus around $1450, but the market could not stop there as the selling exacerbated and it now sits at a point where this "supposed" wave 4 needs to stop and reverse.

The ideal target pullback for a 4th wave is a 38.2% retracement of wave 3, so that's around the $1450, but the fact it's now hitting the 50% retracement of wave 3, its now at the limits of what I consider of an acceptable 4th wave.

The book says wave 4 should not overlap with the top of wave 1, so technically that could come back to test the 2008 highs around $1040, but I don't consider the market to be in a 4th wave when it tends to exceeds more than 50% of a 3rd wave. So that area is $1300, which is why this area is important.

A breakdown or even failure to get back above $1400, would suggest the market is in serious trouble and the bull market is dead and targets of sub $1000 towards $700 will be seen over the coming months/years.

Gold Bullish Case Chart 2
Larger Image

So far it's a 3 wave decline which is ok for now for the bull case, but if this area around $1300 does not hold, then it's likely to see much much lower and I am looking for well under $1000, so another 40-50% from current levels, if the bear case gets confirmed.


Bear Case

The bear case suggests the market is about to start to accelerate lower in what Elliotticians call a "3rd of 3rd", so we are unlikely to see a strong break above $1400-1425 and any bounce will be corrective and more downside is expected.

Gold Bearish Case Chart 1
Larger Image

The good point the bears have is price has tried on a few occasions to get above $1425 and failed and whilst its under that area the bears are clearly in control, whilst the market can see small bounces and even potentially back test of $1425, the technical's are suggesting the trend is strong and likely to move lower.

The fact that we have not seen a strong reversal is not a good sign for the bulls.

Gold Bearish Case Chart 2
Larger Image

Both ideas really suggest a bounce from the current levels as it appears short term there is a triangle, which I suspect it's a 4th wave of either idea, so the next bounce will confirm which idea long term traders need to be following.

I will say no matter what your bias is, price is the final arbiter and traders and investors that fail to respect that will be the ones getting hurt. If they have not been run over already.

As for me, I simply trade what I see, it's very easy if you remain biased to what price action suggests.

No need for any funnymentals just price and patterns.

Elliott Wave in the right makes sense

Until next time,

Take it easy.

 

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