Gold appears ready to breakout again, but it most hold key technical levels, writes Avi Gilburt.
In late October and again in November, I began preparing my subscribers for the last rally phase we experienced in the metals complex. I even penned several articles outlining my expectations. On Nov. 11, I wrote, "Gold Is Approaching a Bottom." As we now know, gold struck its bottom at the time within 24 hours. And, I then reiterated my expectations. At that time, the SPDR Gold Shares (GLD) was trading around 137 before it began its run almost 10% higher since that time.
Then, on Jan. 5, I wrote, "We Are Approaching A Pullback In Gold."
Within that article, I wrote: “We will be seeing a pullback/consolidation over the coming weeks/months before the next larger rally phase in the metals complex. While many investors and traders have been fighting this rally in gold over the past several weeks due to the COT report and other reasons, we are finally approaching a time where those that have been wrongly shorting may have an opportunity to cover. While we may see a bit more of a push higher in January, we are approaching a local top. And, once struck, we will likely see a multi-week pullback before the next rally phase takes us well into the middle of 2020. If the GLD pulls back correctively and holds above the 139/142 support region, then I will remain bullish for the rest of 2020, with my next major target at 170. However, a break below that support would provide us with a strong warning that something more bearish may be playing out. So, please practice appropriate risk management for the next pullback. But, a successful test of support over the coming month or two will likely launch us into a very strong rally in the metals complex into the middle of 2020.”
The next day, gold struck a high before beginning a pullback. And, while it did strike a marginally higher high at the end of January, we have basically remained in a sideways trading/consolidation phase since that time, which have fulfilled my expectations.
I am unsure if this consolidation/pullback has yet run its course. If the GLD remain below 150, we may see one more test of the 142/145 support region. However, the next time we see a strong break out through 150, the next major test of resistance in GLD will be in the 154-56 region. If the market can blow through that region, the door will open to take us strongly up towards 170.
And, should we see the market blow through 156, the 154 level will become our next higher support level. However, if we cannot blow through that region in the coming months, then we may be in for more bearish action in the metals in 2020. So, as you can see, that region will represent a very important next test for the bull market off the late 2015 and early 2016 lows in the complex.
Lastly, I want to remind those that read my analysis that it is based upon probabilities. Most of the time, the market provides us with a relatively clear path and provides us strong goal posts as it moves through its structures. But, none of my analysis is meant to be a certainty.
Avi Gilburt is a widely followed Elliott Wave analyst and founder of ElliottWaveTrader.net, a live trading room featuring his analysis on the S&P 500, precious metals, oil & USD, plus a team of analysts covering a range of other markets.
