2017 Was The Year Of Gold's Consolidation, So What Will 2018 Present?

Wednesday, October 25, 2017

gold bars

One of the most frustrating charts to trade during 2017 has been almost any chart in the metals complex. In fact, if you speak to most metals investors, you would almost think that they have incurred a huge loss in 2017.

But, that is far from the truth. In fact, since we caught the low around 107 in the GLD at the end of 2016, we have seen it rally almost 20% off those lows when it struck its 2017 high back in early September. As I write this article, we are still 13% off those lows. 

Even though we still have seen a nicely positive year for GLD to date, the sentiment is one of despondency and despair. You see, the complex has had multiple opportunities to strongly break out during 2017, but has failed to reach escape velocity despite several set ups to do so. And this has likely caused the negative sentiment pervasive through the market, despite the positive return year. In fact, the best categorization of the sentiment I am seeing in the market is indifference.

But, in order for us to develop the appropriate sentiment which will finally set us up to develop escape velocity in the complex, we will likely have to drop again into the end of the year, and begin to hear claims of $1,000 gold and lower. And, to be honest, many of those calls have already begun. 

Lastly, I want to bring up one more issue I have addressed in the past, as I have been getting a lot of questions about it recently. For those that are looking for a long term vehicle within which to invest should we see the bigger pullback I am looking for in the complex, I would avoid using the GLD (as I see it as more of a trading vehicle), and I have explained why in detail in this webinar.

Price Pattern Sentiment Indications And Upcoming Expectations

Unfortunately, due to the inability of the GLD to break out in a strong fashion, it has become much less likely that we see a rally take us through the 2016 highs in a meaningful way just yet. Rather, while we may still make one more attempt at testing the 2016 high struck in the GLD, it is likely that most of the gain earned in 2017 may be wiped out before the end of the year.

And, if we will see one more rally over the next few weeks which does re-test or even slightly exceeds the 2016 highs struck by the GLD, I would be viewing that move quite skeptically, as it may simply be designed to develop more bullishness in the complex before the trap door opens.

But, despite the potentially non-productive year we may see in the GLD for 2017, I think 2018 can finally provide us with a strong move higher, and it may begin within the first month of the year. In fact, if the GLD is able to begin a strong rally early in the year, it is entirely possible we can see as high as the 150 region by the end of the first quarter of 2017. While I cannot say this is a high probability just yet, as I need to see how the last two months of the year play out, I am seeing evidence of the potential to see a rally which can be even stronger than the one we experienced in early 2016.

Avi Gilburt

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net); a live Trading Room featuring his intraday market analysis (including S&P500, metals, oil, USD & VXX); interactive member-analyst forum; and detailed library of Elliott Wave education. Visit his website:https://www.elliottwavetrader.net. You can contact Avi at info@elliottwavetrader.net.