One month ago I dared to call my Gold update "Major reversal," but I have enough reason for that. Today I prepared a short term daily chart with the focus being on the first bullish move and its correction.
Chart courtesy of Tradingview.com
Like a tree starting from a sprout, the new trend starts from the first counter trend move that has its threshold at the end of July. Gold's price has gained a weighty 9% (almost $100) in one month and has stalled at the $1170 level ahead of resistance. The gold market has been treading water within the 1077/1110 range for two weeks in a row and it looked like another consolidation was going to happen before the new drop down. But, surprisingly the price broke the upper bound and quickly cut through the $1100 level. It then had a small four-day break before it made the final jump to the $1170 level. This is the first serious counter trend move which I have labeled as the large green AB segment.
Nothing lasts forever and the first bullish move has been followed by a correction which consists of the two parts labeled by the small red dashed ab/cd segments. The red cd segment is almost equal (90%) to the red ab segment. The zigzag correction has been very deep beyond the common 61.8% retracement and has reached the $1098 level, just $2 ahead of 76.4% Fibonacci level. But the most important thing here is that it is a correction, not a trend, as the price couldn't reach the "root of the sprout" at the $1073 level.
After the correction, we can chart the projection of the next move up in the green large CD segment. I assume that the CD segment will be at least as long as the 1.618 of the AB segment (Fibonacci ratio). The target for the new segment is set at the $1254 level and it can bring a hefty sum of money once it reaches that level which has another $127 to go (from the current $1127).
The pleasant news for those who honors risk management, now new trough has been formed and the stop could be set just below that higher level ($1098) which is ahead of previous low for good $25. Current risk/reward ratio with entry at $1127, stop below $1098 and target at $1254 is 1:4.4 which is very good proportion. Once price will break through previous high at $1170 the Gold will rocket up to the target.
INO.com Contributor, Metals
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.