Fifth Wave Might See Gold Hit Some Higher Heights – Rod Myer, The Age

There’s been interest in gold in recent times as the market has come off its December lows of $US1179 per ounce and now appears to be consolidating around $US1300 per ounce. Some gold stocks have started to move and there is talk among the enthusiasts about a significant change in the yellow metal’s fortunes.
 
This week we look at the gold question through the lens of Elliot Wave Theory. The chart, produced by Mark Umansky, a certified financial technician and member of the Australian Technical Analysts association, measures the gold price on a quarterly index and is not the usual line chart that plots the metals meanderings.
 
Rather this chart simply joins up the high and low points along gold’s progress to emphasise the Elliott wave pattern. At present the chart has gold sitting between the support level of $US1178 and an upper resistance level of $US1923.
 
The recent move off June lows in the daily market (not shown here) suggests there could be a move away from consolidation, either to the up or down side. The likely direction of such a move is the big question for traders and the stochastic oscillator at the bottom of the chart gives us an indication. The oscillator is a measure of momentum which expresses the closing price in relation to the high low range over a set number of periods.
 
With the stochastic oscillator moving into positive territory it indicates gold is oversold and the next moves will likely be up.
We can now bring in the Elliott Wave Theory to give further weight to our analysis. The classic rising Elliott wave pattern is in five parts with three up waves and two down waves. According to this analysis we can see we have completed four waves. The fifth and final up wave may have commenced when the price bounced off $US1179 late last year.
 
Estimating the likely height of the fifth leg in an Elliott wave pattern is too complex to go into here. However, Mr Umansky has calculated two possible targets, one at $US2849.90 and an extended formation targeting $US4731.80. Achievement of either of those targets will please the gold bugs as it would see the metal in record territory.
 
 

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