Pure Guesswork

A weekly chart of the nearest gold future showing an impulsive move beginning from a base formed during the summer of 2010. Early waves were roughly contained within the 2.618 and 1.618 targets. The next higher target (4.236 times the base) did not provide resistance. As sometimes happens, the opposite occurred. Once through this level, the market moved almost vertically, up 300 dollars in a little over 3 weeks. The next level was 6.854 times the base, around 1900. Here price action became erratic as the move finally exhausted itself. (A similar pattern played out in EURUSD in late 2007-early 2008.)

In the move off this high, the 4.236 level, ignored by the market on the way up, has become support on the way down. We have not closed on a weekly basis below that level (around 1618).

If we look at the internal Fibonacci levels of the entire impulsive move, we can see that the spike low in late September failed at the 50% level. We are approaching once more the 1618 level, approximately 38.2% of the entire impulsive move. A weekly close below this level could see us working down towards the earlier spike low and possibly lower. A 61.8% retracement would take us to around 1440.