In the early stage of this millennium, we have seen Gold very valuable commodity as it made a record high at $1920 per ounce. It was a clear impulse wave ( a strong trend).
According to the Elliot wave theory, price corrects in 3-waves after trending in 5-waves.
The sell off which started in 2011 after the record high should be a 3-wave correction. There are a number of corrective patterns as described by Elliot Wave Principle. One of these patterns is the Zigzag pattern.
Zigzag is the most usually occurring corrective pattern especially after a 5-wave trend or impulse move.
The Zigzag pattern has three stages. The first stage is a 5-wave motive wave or trend (of lower degree) that immediately goes against the long term trend. The second stage is a correction of the first correction (in the direction of the long term trend) which does not exceed the origin of the first correction.
The third stage is a 5-wave motive wave in the direction of the first correction (against the long term trend) which exceeds the origin of the second stage.
The Gold market prices appear to be in the last phase of the first stage as shown by the chart below.
The terminating pattern of the last phase could be an ending diagonal which has completed the first 4 waves.
If price dips further and does not break below $1000, we might see a bounce which could signal the beginning of the second stage of the correction and a break above $1170 could lead to a rally to $1400, around where we would be looking for the second stage terminating signal.
Alternatively, the correction from $1920 could be a double zigzag with a triangle in between.
In this case price could dip further to $670 after a quick retracement as shown by the chart below
We follow price action and adjust the analysis accordingly until a price validates the count and a clear wave pattern is complete. Follow the intra day analysis here>>>>
