The mighty metal has almost hit the Bull Flag’s target, which was set two months ago. Gold was got close as it reached $1439 on June 25th and only had $6 left to reach that level. Usually, when the impulse of the price gets exhausted without breaking the important level or after it briefly penetrates the latter, then the price quickly retraces in the opposite direction. And that’s what we got with the gold price as the impulse initially looked strong enough to catapult the metal to the $1500 area, but suddenly it failed. Therefore, the price dropped back below $1400 to $1382. Then the buyers actively bought this drop up again to the former top, but they stopped just $1 below it and capitulated there as the price plummeted to $1386 back below $1400. These seesaw moves make traders nervous as it is dangerously volatile with more than $50 setbacks.
The question is if it is a pitfall and we shouldn’t expect any further strength of gold, or it’s just a pit stop to make a pause to accumulate a momentum for another push higher? Let’s look into the chart below to try to figure it out.
I dipped into the 4-hour time frame to show you what happens there.
First of all, I would like to point out that I believe that we are just in a correction before another push higher, so I choose the pit stop option for the gold. Therefore, my chart will be based on this idea.
In the chart above, I focused on those options of price behavior that are the most likely given the current conditions. As soon as we are still in the $1382-$1439 range, there are three most probable ways for the gold to go. I took the bar chart (left) and cloned it two times to the right to apply additional scenarios in a single chart.
On the left, there is a scenario of triangular consolidation, which implies the continuation of the current price growth to hit the upper side of the possible contracting triangle. Then the price should retest the lower side of this figure before the gold continues to storm higher levels.
In the center, there is a complex flat correction. In this case, we are on the final move up of intermediary correction, which joins two down moves. The last drop is yet pending there. The price should retest the recent low of $1382 than before it will resume to the upside.
On the right side, there is a simple correction. The price now is in the minor counter-trend correction, and it shouldn’t progress too much to the upside. The final drop should follow immediately to tag the former valley of $1382. After that, the gold should rocket to the upside.
The price targets were set in my previous post, and these are your bets below.
Thank you very much for supporting me with your votes as my preferred target price of $1577 scored the most. The next prevailing choice is $1490. It reflects the classic conservative approach of CD=AB target calculation. The greed is also there as the maximum target price of $1691 is #3. Let’s live and see!
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.