Gold Price: Breaking Down The Structure
New York (Aug 14) The general view on gold remains the same, with the uptrend coming to its end and with a deeper correction on the table. Recent developments suggest that this 5th wave up is an ED and it is probable for gold to make a new high before entering into a deeper correction which initially targets 23.6% retracement of the 2016 rally and lower levels later on.
Later on will be shown evidence why this 5th wave up is an ED (Ending Diagonal) and what complication this structure causes to the future target of gold. It is worth noting that this is an expanding ED, one of the rare kinds for which Elliott himself had only written in theory without being able to observe in practice.
In fact, Elliott does not explicitly use the term "Expanding ED", but he talks about an "Inverted Contracting ED", which is speculated to be the opposite of a Contracting ED, thus an Expanding one (4th figure below).
Even though this phenomenon is quite rare, gold seems to "like" this kind of pattern as no longer than 2 months ago we observed the same exact structure. This similar pattern emerged as Wave (5) of Wave (3) at the first chart. The chart below will explain the characteristics of April-May ED with the purpose of later on comparing to the current price structure.
All the 5 waves of that Expanding ED had 3 sub-waves which are easily distinguished. In terms of time, waves 1 through 4 took nearly the same time to complete, while Wave (v) (a-b-c) took nearly 2-3 times to complete compared to other waves.
Wave (b) of (v) retraced exactly 90% of wave (a) and it was very close to invalidating the entire structure, however impulsive (c) emerged taking gold to new highs in a very steep trend, which changed only once price broke through the upper band of the expanding ED.