SINGAPORE: Spot gold may break a support at $1,160 per ounce and fall towards the next support at $1,032 this quarter, driven by a wave C.
This is the third wave of a three-wave cycle from the September 2011 high of $1,920.30. It has a fierce character, as confirmed by the continuous falls from the April 11 high of $1,365.23.
A projection analysis reveals a support at $1,160, the 23.6 percent level, which temporarily held the fall and triggered a bounce. However, the wave C is capable of at least travelling to $1,032. At its full capacity, it may extend to $826.
Not only the wave mode suggests a bearish outlook, but also a wedge indicates a further drop. The wedge has been confirmed as a bearish continuation pattern, pointing a target around $1,032.
The uptrend from $1,045.85 lasted 123 weeks, more than half of the 221 weeks that the downtrend from $1,920.30 took to complete. In terms of the duration, the uptrend was over. It is highly unlikely to extend.
On the daily chart, the downtrend from $1,365.23 has adopted a five-wave mode, which indicates that this trend may extend a lot.
Based on the amplitude of the wave (4), the current wave (5) may travel to $1,110, which is the 238.2 percent projection level of the trend from $1,309.30.
A break above $1,214 may lead to a gain into the range of $1,238-$1,263, formed by the 38.2 percent and the 50 percent retracements of the fall from $1,365.23 to $1,159.96.
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