Gold Price Can Still See A Lower Low

September 27, 2018

gold prices

The Fed controls the gold market. The manipulators control the gold market. The “swaps” control the gold market. The hedge funds control the market. Yes, I have heard about how everyone is controlling the gold market.

In fact, I even hear such ridiculous statements as, "The banks are pushing us down so that they can buy at lower prices." The problem with this is that the banks have been long for weeks - yet they are still pushing us down?

There is so much misinformation about the gold market, it is truly astounding. A new investor into this complex is probably reeling from all the garbage that is being presented to them about how this market works.

But, I have news for you. This market works just as all other markets work. Once you can calculate appropriate support and resistance points, and understand market structure to identify which one is going to be targeted next, that is all you need to know to understand how to trade the market.

If you want to read a more detailed discussion about these perspectives, I wrote a chapter on manipulation for Gold-Eagle’s free eBook on metals entitled “Was The Metals Market Manipulated To Drop From 2011 To 2015?”

While I came into 2018 with a bullish pattern, which would have led to the breakout I was awaiting in order to signal the commencement of a strong 3rd-wave rally (Elliott Wave parlance), the market broke support for that setup, which then caused me to look to lower targets to resurrect the setup.

So, when we broke the $117.40 support on SPDR Gold Shares (NYSEARCA:GLD), we had to look towards our next downside target in the $105-$109 region to complete a protracted 2nd-wave pullback. Thus far, the market has struck the top of that target region (in overnight action), and has rallied. While the initial rally off the low can count as an impulsive structure, it did not meet the standards we often see in impulsive structures. The fact that it came short of our standards for impulsive structures certainly makes me question whether we have actually struck a bottom in gold.

Yet, we still have a pattern that can count as an initial 5 waves off the recent lows. But, it is the wave degree higher that will either confirm or invalidate whether a bottom has been struck in the market. My suspicion, based upon the lack of a standard pattern off the low, is that we are stuck within a corrective rally, which will lead to a lower low once completed. And, based upon the current structure, we have resistance overhead between $116.25 and $118, which will likely turn us down deeper into our target box below. But, based upon the current structure, it does look as though resistance will be tested within the next week or two.

It would take a larger-degree impulsive structure through our resistance to suggest that the market has bottomed, despite the lack of strong signals that the bottom has been struck. But, please remember to take a broader perspective of this chart. It is likely that once a bottom in this region is confirmed over the next several months, you will not likely see these prices again in your lifetime.

Regarding the common perception that we remain in a bear market in gold, with levels below $1,000 to come, I simply do not agree – especially as long as we hold our support box (holding above $104 on the GLD). In fact, this type of sentiment is exactly what we need to see when we are bottoming in a larger degree wave ii, as I suspect we are.

I want to remind you what Frost & Prechter have noted about 2nd waves in The Elliott Wave Principle:

“Second waves often retrace so much of wave one that most of the profits gained up to that time are eroded away by the time it ends. . . At this point, investors are thoroughly convinced that the bear market is back to stay.”

Is this not the environment within which we seemed to be mired at this time?

View chart illustrating wave counts on the GLD.

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net), a live Trading Room featuring his intraday market analysis (including emini S&P500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education. Visit his website:https://www.elliottwavetrader.net. You can contact Avi at: info@elliottwavetrader.net.

Palladium, platinum and silver are the most common substitutes for gold that closely retain its desired properties.