Following our primary expectation, gold exited the target area to the downside, at the end of last week, and already dropped under its first support at $1,211. However, as long as the market holds above $1,208, we have no confirmation that the high in wave ii in white has already been hit.
As suggested last week, all stops for short positions, that have been established in the target area, should be placed on the point of entry in order to take any risk off the table.
Gold Daily Chart
Our primary expectation remains a continuation of the downward move towards $1,150 – $1,125 to develop Wave iii in white. Here we have added the alternative of a premature low in wave alt. 2, which must be taken into consideration with a probability of 38%.
Even though we expect the market to reach our ideal target within the area of $1,109, the first long-term positions should be entered when reaching the target for our alternative scenario at $1,150 considering that we are expecting an upcoming long-term bottom in this market.
To summarize, our primary expectation for gold is to continue its decline towards at least $1,150 before establishing a long-term low followed by a rally towards $1,400.