The price of gold is up by over $70 an ounce in the past ten days alone. The Fed’s admission that its rate hiking campaign is over-served as a bright green light for traders to start buying non-yielding assets. The yellow metal had fallen to $1973 prior to the Fed’s announcement on December 13th. It was down from an all-time high of $2149 reached ten days earlier.
And while the Fed’s willingness to start cutting rates in early-2024 came as a surprise to most, gold‘s surge didn’t have to. That’s because prior to that piece of news there was a very clear impulsive decline on its hourly chart. A chart we shared with our Elliott Wave Pro subscribers in the morning of Wednesday, December 13th, about ten hours before FOMC. Take a look at it below.
We labeled the selloff between $2149 and $1973 as 1-2-3-4-5, where the five sub-waves of waves 1 and 3 were also visible. One of the first things every Elliott Wave analyst learns is that every impulse is followed by a three-wave correction in the opposite direction. So instead of extrapolating the recent past into the future, we thought “a recovery to the resistance of 2 near $2040 makes sense.“
Of course, these price targets are always rough approximations. In reality, the bulls have managed to push the price of gold up to $2055 so far. But the fact that Elliott Wave analysis warned us about this rally in advance of the Fed’s rate decision later that day is undeniable. The updated chart below shows that it can already be seen as a three-wave structure.
Many experts and laymen alike think that it is the news, which causes prices to move. But in reality, the news serves as mere catalysts to price swings, which were supposed to happen anyway. The stage was already set for a surge in the price of gold prior to the Fed’s December 13th announcement. There is another important piece of information coming later today. Traders will be watching the PCE index for more clues about the Fed’s next move. Once again, Elliott Wave analysis is giving us a hint already.