Home   Links   Editorials

Elliott Wave Gold Update XIX

Alf Field
1 May, 2008

There is a strong probability that the correction in the gold market from the $1033 peak of 17 March 2008 is complete. This view is based on (i) the fact that the anticipated decline of 16% in this correction has been achieved and (ii) that all the minor waves required to complete the correction are now in place.

The low in the cash gold market on 30 April 2008 was $861.8, a decline of 16.6% from the peak level of $1033.90 on 17 March 2008.

In the Comex active month, gold declined from $1015.5 to $868.2, a decline of 14.5%. In the London PM fixings the decline has been from $1011.2 to $871.0, a fall of 13.9%. In Update 18 it was postulated that the current ongoing financial crisis might result in a slightly smaller decline than the anticipated 16% in the PM fixings, which seems to have occurred.

All the minor waves required to complete the correction are displayed in the following chart. Thus with all the minor waves in place and the magnitude of the decline being of adequate proportions, there is a high probability that the correction (being Large Wave II) is complete.

(Click on image to enlarge)

Data updated to 30 April 2008.

As will become apparent from the detailed analysis of the minor waves, there is a small possibility of a slightly lower target price of $855 in the Comex active month being achieved. This would have to happen almost immediately if it is going to occur at all. It is accorded a low probability of occurring.

The full analysis of the correction, being Large Wave II is set out below:

It is interesting to note that the decline in Small C of $82.9 is very close to 61.8% of the Small A decline of $137.1, a common relationship between A and C waves, adding credibility to the contention that the correction is complete.

The following analysis of the minor waves in Small C is constructive:

Note that the two corrective waves, minor ii and minor iv, declining $21.6 and $13.1 respectively, have a Fibonacci (61.8%) relationship, which is quite normal.

Minor waves i and iii declined $43.0 and $44.4 respectively. If minor v were to also decline by $43 (the same was minor i) then the target for the end of the correction would have been $855.4 ($898.4 - $43.0 = $855.4). This is why the possibility of an immediate decline to $855 was floated above. In all likelihood, the $30.2 decline in minor v will be quite adequate and there will be no need to go below $868.2 in this correction.

(Click on image to enlarge)

Data Updated to 30 April 2008.

In the London PM gold fixings, the 61.8% relationship between Small C and Small A is even more precise than in the Comex Futures.

London PM Gold fixings:
Small A is from $1011.2 to $887.7 - a decline of $123.5 (-12.2%).
Small C is from $946.7 to $871.0 - a decline of $75.7 (-8.0%).

A 61.8% proportion of the Small A decline of $123.5 is $76.3, which is extremely close to the actual decline of $75.7 in Small C. It could hardly be more precise.

These clear relationships between Small A and Small C in both Comex Futures and the London PM fixings strongly supports the contention that the correction from $1033 in March 2008 has been completed.

If this analysis proves to be correct, then Large Wave III of Major Wave THREE will commence immediately and should be an extremely vigorous upward movement.

Alternative Count: As has been pointed out on several occasions in the past, corrections can be extremely complex and we need to keep in mind the possibility that
the correction to date is just Small A, with a strong rally (Small B) and a subsequent decline (Small C) to come to complete Large II. This is assessed as having a much lower probability than the contention that Large II has already been completed.

"Good-bye Kiss": Typically when markets breakout of large bases to higher levels, the tendency is for the price level to retract to the breakout level, giving that level a "good-bye kiss" before heading higher. In January 1980 the gold price reached $850 in the cash markets and $887 in the Futures markets. The breakout above the $850/$887 level recently, followed by the rise to a new all time high of $1033, required a price retraction to the $850/$887 level to give it a "good-bye kiss." That has now occurred and we can probably look forward to a rise to new all time highs.

1 May, 2008
Alf Field

Comments may be directed to the author at: ajfield@attglobal.net

Disclosure and Disclaimer Statement: In the interest of full disclosure, the author advises that he is not a disinterested party in that he has personal investments gold and silver bullion, gold and silver mining shares as well as in base metal and energy companies. The author's objective in writing this article is to interest potential investors in this subject to the point where they are encouraged to conduct their own further diligent research. Neither the information nor the opinions expressed should be construed as a solicitation to buy or sell any stock, currency or commodity. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions. The author has neither been paid nor received any other inducement to write this article.

321gold Ltd