Gold Holds Below Resistance Around $2075

21 September 2020

Gold continues to drift sideways within the potential contracting triangle structure since hitting all-time highs around $2075 levels in mid-August. The yellow metal historically produces a sideways movement before breaking towards the major trend, which looks lower.

GBPUSD probable wave counts are as follows: The drop from $2075 through $1862 could be labelled as lower degree Wave 1. Since then the structure might be that of a contracting triangle, which looks complete around $1975 levels over the last week.

If the above structure holds well, Gold might have carved lower degree Waves 1 and 2 around $1862 and $1975 levels respectively. The yellow metal should remain below $1975 levels and reverse sharply from here. A break below $1900 would be encouraging to bears.

Also note that a contracting triangle unfolds into 5 wave’s a-b-c-d-e (not labelled here). If it is a bearish triangle, Wave e might have already terminated around $1975 levels. A break below $1900 will confirm that bears are back in control and would push through $1862.

Alternately, a push beyond $2000 would indicate that the triangle structure is breaking on the north side and Gold might attempt to rally beyond $2075 in the next few weeks. Also note that the rally could be fast and a final thrust before bearish reversal.

Traders might remain flat for now and wait for a break above $2000 to initiate longs or below $1900 to initiate fresh short positions. A protective stop could be place above $2075 on a bearish break.

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