After a rally last year that exceeded our expectations, the second half of 2016 saw gold prices decline to test the target region we had defined at SafeHaven 11 months ago. The decline also measured out as a Fibonacci 76.4% retracement of the entire rally, which was consistent with our expectation that it would be a corrective move inside a larger upward pattern.

Going forward, there are several competing scenarios for the big-picture Elliott wave count. However, the most plausible ones suggest an upward drift that should last for several months.

The weekly chart below reflects our current forecast, which is similar to but not exactly the same as what we described last March. Because price made the expected corrective decline and then found support near the 1100 area, we interpret the decline as either the middle wave of a larger corrective structure or as wave (ii) of what could become a much larger five-wave (i)-(ii)-(iii)-(iv)-(v) advance.

Also, because price data during the past  year have allowed us to refine our cycles analysis, we are now giving more credence to a 53-week cycle as the best predictor of swings, rather than the 48-week cycle we were using previously. The 53-week cycle suggests that the next rally phase should persist until approximately July.

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Even though we believe the next few months favor upward trades, it is still too early to know whether they will produce a higher high over that of 2016. If gold fails to reach a higher high, that would lend credibility to the scenario that the pending rally represents the end of a corrective pattern. The implication of that scenario is that gold should then decline to make new lows sometime in 2018 or later.

On the other hand, if gold succeeds in making a higher high this year, that still would leave open the two main possibilities. Either:

• the rally represents the culmination of a correction, and new price lows are coming, or
• the rally represents wave (iii) of an upward five-wave move, suggesting that the low of December 2015 will not be challenged again.

For context, a recent post at our website includes higher time-frame charts that show the different possibilities.

The edge for traders now is to watch for opportunities during the part of the upward move that we are relatively more certain about. During that move, we expect that Gann square-of-nine levels will act as guideposts. Currently the nearest resistance is at 1266. A retracement from that area could attempt a test of one or both support zones near 1196-1203 and 1161-1174 before the rally resumes. Later in spring or summer we would expect to see price challenge Gann resistance at 1337 and possibly 1374 before the market decides whether to take gold to a higher high.

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