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🥇 Gold (XAUUSD): Navigating the Multi-Year Corrective Phase

Title Image : Elliott Wave Analysis & Forecast, GOLD XAUUSD, M1, 20190425

The prevailing long-term view for Gold is that the market has been locked in a massive correction since its historic peak. After the all-time high of $1920 was achieved back in 2011, the subsequent price action has been carving out a huge, multi-year zigzag pattern, known in Elliott Wave terms as an ABC correction.

Our current focus is on the completion of the second leg and the development of the crucial final leg of this major correction.

Phase 1 & 2: Green Wave A and Green Wave B

The major correction began with a powerful downward move:

  1. Green Wave A (The Initial Drop): This first, sharp phase of the correction concluded when Gold hit a significant low of $1046 in late 2015. This established the initial magnitude and depth of the post-2011 decline.
  2. Green Wave B (The Relief Rally): Following the Wave A low, the market entered a period of recovery, forming Green Wave B. This corrective wave ended at $1346 on February 18, 2019. Wave B, by its nature, is a corrective move back against the trend of Wave A, serving to relieve oversold conditions and lure new buyers before the final leg down.

Phase 3: The Final Decline of Green Wave C

With Green Wave B now marked as complete at $1346, the market has theoretically resumed its correction and entered the final structural decline: Green Wave C.

Wave C is an impulsive wave (meaning it should unfold in five smaller sub-waves) and its purpose is to complete the entire ABC correction, often targeting new lows below the level of Wave A.

Determining the Ideal Target Zone

The targets for Wave C are based on Fibonacci relationships derived from the preceding waves. The most common relationships are where Wave C equals the length of Wave A (a 1.0 extension) or relates to the length of the B wave.

Based on the structure and historical moves:

  1. Initial Target: The most straightforward and essential target for Green Wave C is the area near or below the Green Wave A low of $1046.ion concluded when Gold hit a significant low of $1046 in late 2015. This established the initial magnitude and depth of the post-2011 decline.
  2. Ideal Deep Target: The current analysis suggests a move toward the $955 to $960 area. This level represents an ideal, deeper target where the final leg of selling pressure would likely exhaust itself, marking the end of the multi-year correction.
  3. Potential for Lower Prices: It's important to remember that C waves can sometimes overshoot the common targets, meaning we could potentially see prices move even lower than the $955 area before the final long-term bottom is truly established.

The completion of this Green Wave C is arguably the most anticipated technical event, as it would finally pave the way for a new, massive impulsive wave higher (potentially Wave 3 of a new sequence).

📈 Long-Term Investment Strategy Implications

This long-term corrective framework offers vital implications for investors and positional traders:

  1. Avoid Major Long-Term Buys: As long as the market is confirmed to be within Green Wave C, the priority is not to initiate large, long-term buy positions. The risk of the price falling into the target zone (below $1046) remains high.
  2. Focus on Accumulation Timing: The $955 - $960 area should be viewed not as a stop loss, but as a potential major accumulation zone for patient, long-term investors. Buying near the predicted end of a multi-year correction offers the best risk-to-reward ratio for capturing the next massive bull market.
  3. Risk Management in the Interim: For traders operating in the short to medium term, any rally within this larger C wave should be viewed with skepticism, potentially acting as a selling opportunity as the market makes its way toward the ultimate target floor.

This analysis is based purely on the Elliott Wave model, which is a form of technical forecasting. Investors should always combine such technical insights with sound fundamental analysis (real interest rates, geopolitical risks, and currency fluctuations) and consult a qualified financial advisor before making any investment decisions. It demands caution and transparency when discussing financial risks.

Quote of the Day

“Indices rise and fall, but disciplined traders rise above both.”

Crucial Risk Management Advice

Crucial Advice: Effective trading is based on disciplined risk management, not prediction certainty. Always use a firm stop-loss to protect your capital. Macroeconomic news, particularly from the Federal Reserve or the European Central Bank, can override any technical pattern instantly.

Profile Image of Ghulam Muhiuddin, Certified Technical Market Analyst, 18 Years of consistent market analysis and forecasting</strong>

About the Author

Experience: This analysis reflects the insights gained from 18 Years of consistent market analysis and forecasting, specializing in the application of the Elliott Wave Principle and advanced technical structures.