Why Gold Was Set to Rise BEFORE the U.S. / Iran Clash

Conventional wisdom says that gold is a safe haven investment so it has a good chance of rising in value during times of uncertainty.

So, a January 3 Marketwatch news item is not surprising:

Gold hits 4-month high after U.S. strike kills key Iran military leader

In other words, the headline implied that the U.S. strike "caused" gold to hit a 4-month high.

However, the Elliott wave model indicated a price rise before the Iranian general was killed.

Our Dec. 27 U.S. Short Term Update showed this chart and said:

Given the recent action, we've adopted the alternate wave count in gold that we illustrated on Monday.... Under this scenario, gold will continue to work its way higher.

In case your new to Elliott wave analysis, the Wall Street classic book, Elliott Wave Principle, provides insight into the meaning of "alternate" wave count:

The best interpretation [of a market's Elliott wave price pattern is] sometimes called the "preferred count."

The second best interpretation [is] sometimes called the "alternate count." Because applying the Wave Principle is an exercise in probability, the ongoing maintenance of alternative wave counts is an essential part of using it correctly. In the event that the market violates the expected scenario, the alternate count puts the unexpected market action into perspective and immediately becomes your new preferred count.

This is why it is imperative to stay on top of a market's price action. The second-best Elliott wave interpretation today can become the preferred interpretation tomorrow as a price pattern unfolds.

Getting back to gold, the price of the precious metal climbed even higher after hitting that 4-month high on Jan. 3. And, again, headlines linked the continued rise to the ongoing clash between Iran and the U.S.

This is from a Jan. 7 Bloomberg article:

Gold surged above $1600 an ounce for the first time in more than six years after Iran attacked military facilities in Iraq hosting American troops... .

Yet, as mentioned, the continued price rise was anticipated by our Dec. 27 U.S. Short Term Update.

So, the evidence suggests that neither the U.S. airstrike or Iran's retaliation "caused" gold's price to rise. The "cause" has been investor psychology, as reflected by Elliott waves.

The important question now is: What are Elliott waves suggesting about gold's next price move?

Get the answer with no obligation by following the link below.