This update follows our October 2014 and January 2015 posts about gold and silver respectively, in which we wrote that traders should expect precious metals to rally in a corrective pattern starting late last year. That forecast appears still to be on track. Here we offer some price targets to watch for gold and also for the SPDR Gold Shares ETF (symbol GLD).
As context, we had been counting the decline in metals since 2012 with the expectation of an intermediate low late in 2014. Silver made its low at the end of November, and gold made a higher low at the same time. We believe the Elliott wave pattern for gold produced a truncated fifth wave to complete the long decline even as silver traced a more appealing terminal pattern. The long decline probably represented wave A of an A-B-C correction. Now we believe prices are advancing in an upward corrective wave B which should continue into the summer.
The corrective pattern for gold that began at the end of November should consist of three segments which we have labeled as [a]-[b]-[c] on the weekly chart below. After the rally in [a], price dipped somewhat alarmingly in [b], but it managed to form a higher low in March. Now the scenario calls for gold to advance in wave [c] to challenge and probably exceed the January high.
The most likely price targets for the present move in gold are $1,309 and $1,354, although $1,245 may offer some resistance along the way. The area around $1,309 is especially appealing because it is near the upper edge of the Schiff channel defined by waves [a] and [b]. However, the decisive factor affecting how far the rally can extend may be the dominant 64-week price cycle, which suggests that we may see a high around June or July.
We expect the preeminent gold ETF to follow approximately the same path that we described above. The equivalent price targets for GLD include $125.80 and $130, with additional resistance possible at $119.70. Of those levels, the middle one is probably the most attractive.
We caution traders not to become too attached to long positions in precious metals. If our primary counts are correct, prices should begin a new leg of their decline this summer which could produce new lows in 2016.
At our website, you can find a parallel analysis for silver and a related ETF as well as information about how you can receive several free "insider" posts that are normally exclusive to our subscribers.