Gold seems have completed a 5 wave down.
It can be a micro 4, it can be major A (or some other degree A). What that tells me is that it can make a new high or a new low. GREAT! Why not toss a coin?
Well, I can certainly toss a coin, but I can also monitor the makeup of the waves as they evolve, as well as other technical indicators.
It is getting overbought on the daily chart but that does not tell anyone anything.
One thing to Watch is the gold diggers, as long as they lead, the metal has a good chance of acting well.
At a higher level, it is a question of whether market participants expect the central bank infusion to juice up the system to the point of feeling inflationary pressures in near future or not.
On this 60-min chart, despite having the alternate count, I think we are having a 5 wave up, with the 5th wave yet to come.
The way I use waves is as a guide line, and then I check their viability via other technical means.
I should remember that there are a few factors that determine the price of the yellow metal
- Future inflation expectations
- Political instability
- Financial instability
- The direction of US Dollar
So, the horrible, senseless events in Mumbai, and any escalated rhetoric between India and Pakistan may play a role. Also, the rally in US Dollar looks a bit tired and in need of a breath
So far so good for gold.
I, however, should not get complacent. There is potential for the yellow metal to go some good distance, all it has to do now, is impulse up, and correct shallow – higher highs and higher lows, regardless of what the story of the day is.