Gold encountered relatively strong resistance area at 656$ -658$ for the spot dollar price (38.2% Fib on the short set & 23.6% Fib on the long set –weekly chart). That’s along the relevant Fibs on GOLD/EURO & GOLD/YEN (yesterday charts). The price of gold pulled back sharply as smart traders took profits at the zone of resistance taking advantage of the hype regarding so called International tensions.
As I said before the price of gold is directly affected by pure economic and monetary factors. International tensions and terror events are not directly related to the price of gold. It's the psychology they might manufacture which can affect the short term price action. Correlated events like in India and the Middle East should be seen as a short term opportunity for profit taking when the technicals confirm.
Nevertheless, this is the Great Global Gold Bull Market and holding a long term core gold positions is a smart thing to do as timing the 24 hours gold market is extremely difficult. This is the third primary Elliott wave and as such it should be highly impulsive and extensive. The current Elliott wave is quiet complex and the outlook is bullish.
Short term 30 min chart showing this week action, minor Elliott wave count suggest a completion of impulsive wave then a counter impulsive correction (a) to the 38.2% Fib. Given the resistance at 5 (see weekly chart below) the odds favor further consolidation (c bottom) before moving higher. Traders should be patient at this point and wait for short term buying opportunity, all bets are off if the price of gold goes above 655$ – 658$ - watch out for head fakes !
Below is the Weekly chart annotated with the wave count for the past 2 years – currently Wave 3 of 3. Click on the chart to enlarge: