In late October, we alerted readers at SafeHaven that an important price low was imminent for gold. Our more recent post about silver prices explained why we believe the decline in precious metals is over... for now. After making structurally complete declining patterns, gold and silver have entered a time when cyclic pressure is now pushing prices upward. The advancing patterns for both metals should last until at least the middle of 2015, even though the advance is expected to be corrective. This article presents newly calculated resistance targets for gold. We believe the current price area will serve as a foothold for prices to reach one or more of those targets during the next few months.
The monthly chart below presents our main Elliott wave count of gold's decline since 2011. Although the pattern appears complicated, it can be distilled down to a five-wave [i]-[ii]-[iii]-[iv]-[v] impulsive move which we believe was finished at the end of November 2014. If price is now moving upward in the B-wave correction, then the channel boundaries represent initial upward targets and areas to watch for resistance. Note that price broke through the median of the channel last month - something it had been unable to do since 2013. The upper edge of the channel will be in the vicinity of 1375 in May 2015.
The weekly chart highlights one of the factors that probably will throw a lot of traders off the golden path. The impulsive wave down, which we described earlier, ended in a higher low, rather than the lower low it should have made. This demonstrates the importance of watching related markets for a commodity - in this case, watching the silver market in conjunction with gold. Typically the two metals make their price lows simultaneously. In this case, silver made its low in a fairly unambiguous way on the evening of November 30, 2014. Gold made a low on the same evening, but its low was higher than the gold low of earlier in November. We believe the final downward wave [v] of A in gold was a truncated low - something that is fairly uncommon, but which can happen in conjunction with major turns.
On the weekly chart, note that price has fallen back from the January high to meet our downward target area and to retest the area where it broke out of the downward-sloping channel. We are watching for a large corrective structure to develop. At present we believe the first leg, (a) to be complete and searching for the (b) wave low. This should be followed by an upward in wave (c) of B.
We have drawn three prominent targets for upward wave B. Two of them, 1347 and 1383, are near where we expect the upper boundary of the monthly channel to be in spring 2015. The third target, 1433, would come into play if price breaks out of the monthly channel. Any of the three levels could bring about the end of the B wave. In order to catch a good entry for the expected downward C wave, it will be important to watch the way price behaves with respect to the resistance levels, the various channels shown on the charts, and the expected cycle high in late spring or summer.
We will post a companion article with updated charts for silver at our website tomorrow.