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Metals , Investing

Gold: See What This Fibonacci Ratio Says About Trend

A Fibonacci .618 retracement is a common reversal point in the markets

by Bob Stokes
Updated: August 13, 2020

Fibonacci numbers follow a sequence that begins with 0 and 1, and each subsequent number is the sum of the previous two (0, 1, 1, 2, 3, 5, 8, 13, 21, 34, and so on).

After the first several numbers in the sequence, the ratio of any number to the next higher is approximately .618 to 1; its ratio to the next lower number is approximately 1.618 to 1.

Fibonacci ratios appear throughout nature, from the shape of galaxies and seashells to molecules and even the human body.


The Wall Street classic book, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter, explains why these ratios should be of keen interest to investors:

The Fibonacci sequence governs the numbers of waves that form in the movement of aggregate stock prices...

The fact that waves produce the Fibonacci sequence of numbers reveals that man's collectively expressed emotions are keyed to this mathematical law of nature.

Here's what you need to know: Price turns often occur when Fibonacci ratios between market moves -- or waves, as we call them -- have been reached.

Besides the stock market, Fibonacci ratios also show up in the price charts of other financial markets, like gold.

Here's a 15-minute chart and commentary from our August 10 U.S. Short Term Update:


Gold's high at $2072.12 led to [an Elliott] wave decline to $2015.34 last Friday, as shown on the chart. Since Friday's low, prices traced out an [Elliott] wave rally where [one] wave took the form of a triangle. At today's $2050.36 high, gold retraced a Fibonacci .618 of the decline from $2072.12.

Gold, as you know, fell almost 6% on August 11, the very next day after our U.S. Short Term Update showed subscribers this analysis.

But the August 10 U.S. Short Term Update didn't stop there. It went on to mention specific price targets for gold.

You can get that analysis, plus find out how our near-term outlook ties in with our big-picture forecast for the yellow metal in our flagship investor package, which you can access risk-free for 30 days.

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Avoid the Investment Mistake of “Following the Follower”

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More than that, a typical investor looks to others without even being aware of it.

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Under socionomics, cognitive uncertainty in survival-related situations is the context within which individuals shift from a rational basis for action to an instinctive, impulsive mode of unconscious herding. This shift necessitates the individual's reorienting away from his own information, valuation processes or plans and toward a focus primarily on the projected valuations of others as a guide to action, a reorientation that takes place unconsciously.

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