A Look at a Key Price in Daily Gold

Jan 28, 2009: 11:41 AM CST

Gold prices have been confusing traders lately, as most have expected gold to be surging in this environment while in reality, it is forming a downward-sloping consolidation.  Let’s take a look at a daily chart of Gold Prices to see a critical area that could give us clues about the next swing in gold prices.

Gold Daily Chart:

Gold Daily Chart

Let’s start from the top.  Price is in a short-term uptrend that started in November as price comes into prior resistance.  However, on the weekly chart, Gold is in a down-trend channel corrective phase, so we have a conflict of timeframe trends.

The most obvious price point is the prior resistance around $920 per ounce that set in with a triple-top in early October 2008.  Price tested the $920 level recently and appears to be forming a down-swing against this level, re-confirming this area as resistance.  The most likely support zone for the current down-swing would be the confluence of daily EMAs around $850 per ounce.

Next, we see a Five-Wave potential fractal Elliott Pattern that took price from $700 to $920 – notice the wave labels in the diagram.  An alternate interpretation of this move is the “Three Push” pattern which is a reversal pattern that forms as price makes three symmetrical swings in the same direction while forming a momentum divergence.

We have such a momentum divergence here, as price has made new swing highs while the momentum oscillator has failed to make three new highs, signaling possible weakness.

While it appears that the next likely swing would take price down to the $850 to $860 area (and then we’ll need to see what happens then to determine the next swing), price certainly could consolidate at resistance and break the $920 level.  If so, we could see a rally that takes us to test the $1,000 per ounce high to test prior resistance from July 2008.

Keep watching Gold Prices for additional clues, as we stand currently on an interesting price juncture.

Corey Rosenbloom
Afraid to Trade.com

14 Comments

14 Responses to “A Look at a Key Price in Daily Gold”

  1. Stephan Says:

    You are breaking rule number 3.

    3. Wave #4 Cannot Enter the Territory of Wave #1

    Cheers,
    S.

  2. Tim Sykes Says:

    Don’t forget the downward trending resistance from highs on 03/17/2008 and 07/15/2008. The most recent high on 01/26/09 wasn’t able to break through that resistance. Timmy

  3. steve geringer Says:

    Hi Corey,

    Do you mean $920 (instead of $820) for resistance ?

    Steve

  4. Dinosaur Trader Says:

    The thing that bothers me most about gold is that it seems like the obvious trade… everyone thinks it’s going higher.

    -DT

  5. Corey Rosenbloom Says:

    Stephan,

    Elliott allows for a slight bending of this rule in respect to commodity prices.

    To me, it more closely resembles the “Three Push” pattern.

    Either way you interpret it, it’s bearish at resistance.

  6. Corey Rosenbloom Says:

    Timmy,

    Good to hear from you!

    True, it’s more than the horizontal resistance that’s giving gold trouble.

    We have a downward sloping trend channel with both support and resistance lines that have been containing price since the March ’08 highs. Looks like we may push to the downside now.

  7. Corey Rosenbloom Says:

    Steve,

    Thank you for pointing that out – I was trying to get the post out quickly to get back to trading. I should have taken more time with it. The numbers were small on the chart I was looking at. I’ve fixed it in the post.

  8. Corey Rosenbloom Says:

    DT,

    That’s probably why the down-channel has happened. I had so many people telling me to buy gold and I did a few trades in it but it just wasn’t the safe-haven everyone expected. When the world’s falling around you – you buy gold. But when the world fell in October and into December, gold didn’t move much… or at least didn’t break to record highs as so many people thought.

    It’s one of those hidden things of the economic crisis that people may be overlooking – why gold didn’t shoot to $1,500 or so.

  9. geoff Says:

    maybe i need to tune in always cause until now i still cant get it..

  10. Corey Rosenbloom Says:

    Geoff,

    I don’t know what you mean.

  11. Josh Fielden Says:

    Corey, I am amazed how few people realise that gold (and silver) are political. Their price is suppressed (manipulated) by all the Central Banks to keep fiat currency going. That is why it has not risen more. There is a lot of information about the gold price suppression scheme in the “Matisse Library” on this site: http://www.lemetropolecafe.com/guest_register.cfm
    It is an education I promise you ! The final question is when will those CBs run out of gold ? Quite soon probably.

  12. Josh Fielden Says:

    IT should have been http://www.GATA.org.
    Hope I didn’t waste anyones time. The gold market is heavily manipulated. The proof is there. Frank Veneroso’s article significant.
    Sorry

  13. Corey Rosenbloom Says:

    Josh,

    Thank you for providing the link and no one’s time was wasted. It helps to learn as much as we can.

    Could indeed help explain why gold is behaving contrary to most people’s expectations… and it is a scary thought what you mention there.

  14. Complacentpanda Says:

    The dollar has been fairly strong for a month now. Wouldn’t expect gold to rise too much in price until $USD breaks down more.

    Everything is manipulated in some sense, man. That’s how the world works.