Gold has met a couple of price targets already - will it correct deeply before heading higher?

Gold has tagged the $1097 level that I calculated for a thrust upward from the triangle I've marked and showed on my weekly chart. Now what? Will it proceed on up to the $1192 that I'd previously calculated based on long-term Fibonacci? Well I'm concerned that it may go into correction mode before continuing upward. It already met the $1005 P&F target for the $GOLD (continuous contract) chart. As you can see by that default Stockcharts.com P&F chart (under the daily $GOLD candlestick chart, below), it's continued bullish with the ascending tops pattern, but doesn't have a new bullish target on that. There's a bit of negative divergence on this last push up, and it's up against its upper channel trendline. And I see that Tony Caldaro with his Objective Elliott Wave (site in list at right) targeted 1112 or 1119 for it. These are among the reasons why I'm giving an alert to watch for a reversal. If gold simply pulls back to its 20-day moving average (or 34-day exponential moving average, or 50-day moving average), that should not be so bad. And it's possible that's all we'll see. (Especially under an alternative, larger triangle theory, measuring 681 as A, 1007 as B, etc., that would point to about $1220 with this being the third wave and a correction that would probably only test the $1026 prior swing low and 50-day moving average. Not my favorite Elliott Wave interpretation, but might be possible.) But deeper levels are possible, in my humble opinion, so I'm recommending that gold traders keep an eye on it.

As for the fundamental outlook, I've previously quoted from and cited to Tony Caldaro's bullish thoughts on gold. And it's obvious with the currency devaluation moves and uncertain economic times that gold remains attractive. Here's another bullish view that also addresses deflationary as well as inflationary concerns: "Gold at both ends of the economic K Wave" by Clif Droke. FSO
Editorial 11/06/2009, http://www.financialsense.com/editorials/droke/2009/1106.html. "K Wave" means Kondratieff Wave which is a long-wave cycle lasting on average 60 years, and it's generally believed we are moving through its "autumn" phase into "winter" when deflation becomes more acute. Opinions seem to differ on whether that bullish or bearish for gold - though it does seem bearish for equities and commodities as it progresses toward the bottom of the cycle. And P.S. - I checked the monthly P&F chart. While it's got a "long tail up" warning alert, is shows a bullish price objective to $1635 so long as it doesn't break long-term support.

My basic leaning is positive toward gold, but the technical patterns do have me on edge. I've viewed the charts time and again and the pattern from 681 looks to me like a leading diagonal A, triangle B, now five-wave thrust C. That doesn't answer whether it will complete a larger (B) wave up to be followed by (C) down, or a more bullish diagonal wave 1 up that's still to give way to a deep pullback wave 2 down. For a wave 2, the pullback level could be to $841 or lower (also depending on just where gold finishes this wave up).

Levels to watch based on the recent swing lows (that look like waves 2 and 4 of the thrust upward from the apparent triangle apex) are 990 and 1026 respectively (obviously watch 1026 first), as well as the uptrend support (channel) line and moving averages/Bollinger Bands and midline; and especially the apex area about 950. Notice that the support trendline on the P&F chart would give support especially above the $980/990 area - so keeping an eye on gold's price movement against the default Stockcharts.com P&F chart isn't a bad idea. If gold goes into a real correction from about 1100, however, then a 50% retracement back to 681 would be $890, and 61.8% back would be about $841.