October 24
Scenario for today
Elliott: correction zigzag 1649.60
It looks set for gains to 1655.43. Supports at 1625.95 and 1618.38. A break of 1596.47 will damage this bullish structure.
Warning: Low Zone
A likely upside target level for gold at this time appears to be $1,780, which is a good bit above where the price is today.
We are inclined to think that we’re relatively close to an upswing in gold. The point here is if a decline is seen before the upswing, it could simply be the formation of a double bottom with the rally yet to come. So a short move down did not invalidate any rally this week since the rally had not yet begun. We have simply seen a rebound after an initial bottom with a second bottom now being formed. As long as the two support levels in the $1,600 range hold, the outlook remains bullish.
Gold prices fell last week in volatile trading, where mixed feelings dominated global financial markets amid the uncertainty that spread among traders over the outlook for the European debt crisis, where traders are waiting for next week’s EU summit amid hopes that EU leaders will be able to reach a resolution to the debt crisis.
Meanwhile, data from the United States provided mixed results over the performance of different sectors, although what was evident is that the pace of recovery remained weak, and that spread some pessimism over the outlook, which boosted demand for lower yielding assets including the U.S. dollar, which put gold prices under negative pressure.
Traders all around the globe will be eyeing the EU summit next week, where traders hope that EU leaders will be able to craft a plan that will ease the tensions in the euro zone area and help support debt-laden countries. Nonetheless, the level of uncertainty remains very high amid mixed reports last week that EU leaders are struggling to reach a final resolution, however, any solutions are not expected to be final and more work has to be done in order to stabilize conditions in the euro zone area.
The week is full of economic fundamentals from all around the globe, especially from the United States, where data on growth, income, spending, and inflation will be released next week, as the first GDP estimate for the third quarter will be released, in addition to the income report, where both reports are expected to show improvement.
We continue to expect that gold prices will rise over the coming period, however, we also expect volatility to continue to dominate gold prices until EU leaders reveal their plan to stabilize the euro zone debt crisis, and that could push gold prices lower as well over intraday and short term basis.
We should note that if the EU summit disappoints investors, it’s highly likely that gold will extend its losses based on recent trends, where gold has been moving in the opposite direction of the U.S. dollar and in line with equity markets, and if that relationship prevails next week, the direction of gold prices will depend heavily on what EU leaders have to offer.
