Gold (XAUUSD) remains a crucial asset in many traders’ portfolios, serving as a hedge against inflation and market volatility. Recently, analysis within the framework of Elliott Wave Theory has provided significant insights into the ongoing trends observed in the gold market. Notably, since the low recorded on December 18th, gold has maintained a sequence of higher highs, indicating bullish momentum that traders should note.
As gold transitioned through various phases, it notably completed a three-wave retracement, after which it surged to a targeted price zone. This analysis focuses on understanding these movements and employing technical indicators to foresee future price actions.
The Current Elliott Wave Analysis
In the latest update on January 23, 2025, traders observed a developing five-wave structure beginning from the significant low of 2656.3. The current scenario indicates that three waves have already manifested in a downward correction, identified as the “abc” pattern in red. As long as prices maintain above the 2735.8 low, this serves as a supportive floor, suggesting that the bearish phase known as wave (iv) could be nearing its conclusion.
An anticipatory view prompts the expectation that wave (v) is underway, aiming towards a well-defined target range between 2769.99 and 2708.55. Professional traders often leverage Fibonacci extensions to set these targets; in this case, the extension points align with a 1.236-1.618 inverse Fibonacci calculation of the preceding wave (iv).
Projected Movement and Trading Strategies
The recent momentum in gold has corroborated bullish expectations, with wave (v) successfully hitting the anticipated price range of 2769.99 to 2708.55. An additional price target for wave (v) — aligning with the amplitude of wave (i) — stands at 2804.4. However, as this five-wave structure approaches its peak, indicators suggest the cycle will soon draw to a close, requiring traders to adopt cautious strategies going forward.
It’s crucial that regardless of the bullish outlook, traders resist the temptation to short against the prevailing trend. Once the anticipated wave ((ii)) retracement unfolds, projections indicate that this pullback will likely touch the 50 to 61.8 Fibonacci retracement levels, calculated from the previous low of 2656.6.
As the gold market continues to evolve, Elliott Wave Theory provides traders with a structured approach to understanding price movements. With a clear bullish trend established and additional targets laid out, it is imperative for traders to remain vigilant. The key takeaway from current analyses is to prepare for upcoming fluctuations without overextending positions against the primary bullish trend. Implementing sound risk management strategies will ensure that traders navigate through the anticipated pullbacks effectively while positioning themselves to capitalize on future movements in the gold market.