Gold is bullish against $1721 low

Technical Analysis:

Gold is preparing to turn higher towards $1865 mark as wave (c) progresses going forward. The yellow metal could drop toward $1740-45 mark, which is fibonacci 0.618 retracement of the recent upswing (wave i), before resuming its rally.

Gold structure has remained constructive for bulls since $1677 lows. The metal had rallied through $1834 mark, taking out initial resistance as highlighted on the 4H chart here. The above rally has been marked as wave (a) on the chart.

Ideally, an impulse wave should be followed by a corrective wave, which sub-divides into three waves. Gold prices dropped to $1721 in a corrective zigzag pattern a-b-c, terminating wave (b) of the larger degree wave structure.

If the above is correct, Gold prices should rally towards $1865 mark sub-dividing into five waves. For the above bullish structure to remain intact prices should stay above $1721, going forward. Furthermore, lower degree wave I of (c) already looks to be complete.

Gold is working on wave ii towards $1740-45 zone, which is fibonacci 0.618 retracement of wave I, before wave iii rally resumes towards $1800-10 levels. Traders might want to initiate fresh long positions on a corrective drop to $1740-45, with risk around $1721.

Prepared by

Finacademy Technical Team