In my last public article on gold, I outlined my expectations for a rally to the $2,428 level, explains Avi Gilburt of ElliotWaveTrader.net.
As I write this article now, gold is finally giving us the pullback I wanted to see to set up the rally toward that target. Now, I have been doing this publicly for 12 years. During that time, we have called major tops and bottoms in the metals market, including calling the high of 2011 within $6 of the actual high struck, as well as the exact bottom in gold at the end of 2015. Even before we struck the high that we were calling for in 2011, I outlined my expectation for the potential that we can drop from that 2011 high down towards the $1,000 region.
Moreover, I have also outlined through the years that my analysis is based upon market sentiment rather than the fundamentals upon which most of the market focuses. Yet, these same fundamentals have caused most market participants to remain quite bullish at the highs and quite bearish at the lows. However, many still view me as being a bit “nutty” as these are just some of the comments I have received over the years from readers who have disagreed with my perspectives:
"With all due respect Avi, you plainly do not understand the gold market."
"Your TA is useless. You don't understand the fundamentals because you only look to the past. Gold bulls are forward-thinking. The times they are a changing..."
"The problem is that TA is like driving a car by only looking in the rearview mirror....There is no foresight involved; it's all based on past performance. The future of the fundamentals is what you fail to grasp."
"There is no way you can understand what is going on in gold by doing technical analysis. Gold is driven by fundamentals."
"Technical analyses is all well and good, but you cannot apply it to the PM sector which has been artificially manipulated and suppressed for years."
What is most interesting is that these comments were posted when I was calling for a major turn in the market and their “fundamental” bias had them looking the wrong way.
In the meantime, I think anyone that has followed us in the metals market knows that our record has been second to none in outlining the turning points and the targets for the complex.
So, we are now at an important juncture over the coming several weeks. While I still maintain an expectation that we can rally towards my ideal target outlined above, how the market takes shape in the next two weeks will likely tell us if we break out on our way to that target sooner rather than later.
Moving into the analysis, as I noted, the next few weeks are important. Smaller degree support right now for gold is in the $1,850 region (GC April contract). As long as that support holds, I am expecting a rally over the coming weeks. Should that take shape as a five-wave structure, which adheres to our Fibonacci Pinball structure, then we will have to prepare for a breakout in gold over the coming month, which will next point us north of $2,100SPX and quite rapidly.
However, if the next rally is corrective, then it opens the door to the potential that this pullback/consolidation will take us several more weeks and can potentially take us down to test the $1,780 region.
So, I would be watching the $1,850 support very closely in the coming week, as well as the structure of any rally. That will give us a very strong indication as to when gold intends to break out next to the $2,100 region, as we look toward the $2,428 target in the coming year or two.
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, and USD, plus a team of analysts covering a range of other markets.