08.05.201410:54 Forex Analysis & Reviews: Gold wave analysis for May 8, 2014

Gold price has broken yesterday the short-term support at $1,304 and pulled back towards $1,290 as expected by our analysis we posted yesterday. Gold price has pulled back towards the Ichimoku cloud as shown in the 4-hour chart below. Gold price after making a low at $1,268, has started a bullish pattern of higher highs and higher lows. A break above $1,315.50 will confirm and strengthen this view and push price above $1,331. A break below $1,275 and a daily close below that level will change the trend to downward and give us a target of $1,200.

Short-term support is found at the green trend line support. At current levels being long has a better risk/reward ratio than being short. Our stop is very close and the bullish potential is big. Buying near $1,290 is preferred as well as using $1,284 as a stop and the $1,330 target. The upward move from $1,268 is overlapping but with higher highs and higher lows. This could be the upward wave C we are expecting to reach $1,350-60.

In the daily chart above we show our preferred wave count. We expect prices to move towards $1,340-50 as long as price trades above $1,270. If support at $1,270 fails we will sharply fall towards $1,250 with next target at the $1,200 level. Our longer-term view remains bearish as long as price trades below $1,391 with $1,100 as target. The best scneario for us will be to see a bounce to $1,350 where we would sell as this would imply the end of wave 2 and the start of wave 3 down towards $1,100.