Elliott Wave Gold Update 20

July 4, 2008

Update 19 published on 30 April 2008 expressed the view that the there was a strong probability that the correction from the March 17 high of $1,033 was complete. In addition Update 19 contained the following warning:

“As will become apparent from the detailed analysis of the minor waves, there is a small possibility of a slightly lower target price of $855 in the Comex active month being achieved. This would have to happen almost immediately if it is going to occur at all.”

Within 24 hours the gold price did indeed decline to $853 (London PM fixing) and $853.9 on the Comex 2nd month futures. These levels remain the lows for these bench mark series that are used to monitor the gold market in these Updates. The correction low was achieved 2 months ago but the gold price has not exhibited the sharp upward moves associated with the commencement of Large Wave III of Major Wave THREE. A “third of a third” is expected to be the most powerful of moves.

What happened? The chart below depicts the updated gold price action. The price action over the past 2 months has comprised several corrective 3 wave series which combined to form a triangle. This is not impulsive third wave action. The obvious conclusion must be that this action is part of an extended Large Wave II.

Data updated to 1 July 2008.

It seems as if the market deemed the decline to the $853.0 low point to have happened too quickly. The decline encompassed only 31 London trading days. Although the required 16% magnitude of the decline had been achieved at $853.0, the market spent another 35 trading days tracing out a triangle in Small wave C, marked a-b-c-d-e between the red boundary lines above. This used up more time, thus helping to form a firmer base for the coming advance.

A triangle in this position is an unusual occurrence, but there have already been some strange corrective formations in this gold market to date. It is interesting that while the extension of the correction absorbed 35 trading days, the market respected the $853.0 low point during this additional time period and the low price was never challenged.

Once the gold price broke out of the triangle after reaching point e, the market has treated us to some notable gains, including a rise of $32 in one day, the largest one day rise in 23 years. Now that is more like “third of a third” action! This better, more positive, action in the gold price is an indication that the Large Wave III of Major Wave THREE may now be underway.

If this is correct, the market should rapidly move to new highs above the March $1,033 peak. The only word of warning is that corrections can sometimes be extremely complex and are not over until they are over. Nevertheless, the signs look positive that we are finally in Large III of Major THREE.

We can now make the assumption that the low for Large II was at $853.0 on the London fixings. This allows us to update the template for Major THREE. To start with, this is the template that was published in Update 18 on 24 March 2008:

That template forecast a low for Large wave II of $850, so the actual result of $853 is remarkably close to that forecast. The following updated template is not much different from the above one because the low for Large II was so close to the forecast :

Revised Wave Labels.

For sake of clarity, the revised naming format for the various waves is outlined once again:

The bull market consists of five Major waves designated ONE, TWO, THREE, FOUR and FIVE. Major TWO and Major FOUR are corrective waves with a 25%-30% magnitude of anticipated decline.

Major upward impulse waves, ONE, THREE and FIVE will each contain 5 Large waves designated in Roman Numerals, I, II, III, IV and V. Large II and Large IV are corrective waves with a 16% magnitude of decline, give or take a couple of percentage points.

Large waves I, III and V will each contain 5 Small waves designated 1, 2, 3, 4, and 5. Small waves 2 and 4 are corrective waves with approximately 8% magnitudes of decline.

Small waves 1, 3 and 5 will each contain five Minor waves designated i, ii, iii, iv and v. Minor waves ii and iv are corrective waves each declining 4%, give or take 1-2%.

The gold market has just completed Large wave II of Major wave THREE. It is currently in the process of commencing Large III of Major wave THREE, which should be a strong upward impulsive wave that could reach to above $1,500 before it is completed. (See the details in the Template above.)

These forecasts are based on the rhythms detected in the gold market during its early stages.

It is too early to produce a template for the small waves within Large Wave III. At this stage all we can say is that there should be two 8% corrections within Large Wave III on its way to the predicted level of $1,572. The first of these 8% corrections is unlikely to occur before the current small wave exceeds the prior high of $1,033.

Alf Field

Comments to: [email protected]

Disclosure and Disclaimer Statement: The author is not a disinterested party. He has personal investments in gold and silver bullion, as well as in gold, silver, uranium and base metal mining shares. The author’s objective in writing this article is to interest potential investors in this subject to the point where they are encouraged to conduct their own further diligent research. Neither the information nor the opinions expressed should be construed as a solicitation to buy or sell any stock, currency or commodity. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions. The author has neither been paid nor received any other inducement to write this article.

Alf Field was born and raised in South Africa. He is a Chartered Accountant by training. Together with a partner, he started his own funds management business in 1970 in Johannesburg. In August 1971, when the USA stopped converting US dollars for gold at $35, Alf perceived a major opportunity to buy large quantities of gold mining shares personally and for clients. In 1979 he migrated with his wife and four children to Australia. He is currently a self-funded retiree who manages his own portfolio. In 2002 Alf started writing articles on gold related subjects, including monetary history, as well as a series of gold price forecasts using the Elliott Wave technique.

China is the world’s biggest gold producer with more than 355 tons annually. Australia is second.

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