GLD Wave count suggests one final pullback

In this post I show that GLD broke below the 38.2 fib and is now testing it from below.  While I pointed out that this was an important technical juncture as well as the two ways it could go, I did not render a strong opinion on which way it would likely go.  In today's post I want to show my wave count for gold which suggests that the resistance will hold and that GLD will likely take one more wave down (along with silver IMO) before the bottom of this 2 year bull market retracement is in.

In short, the GLD count is likely to be very similar to the SLV count and so that is how I modeled it below.  The model does have a lot of Elliott wave fundamental backing including alternation shown at 2 levels.  While Prechter never specifically states it, I have found that EW principles are more easily discerned in C waves/3rd waves (the current wave downward is a C wave IMO).  Thus, we see features like alternation and 3rd of 3rd cliff diving show up very prominently.

In any case, GLD is not only trying to break back up through the 38.2 fib shown in the last post, it is also up against the top channel trend line in the Elliott wave sequence.   Thus I think the odds strongly favor one more leg down to try to retest the recent 3rd wave lows.  Note that wave blue 1 down is not very long and that wave 5 should be the same length as wave 1 if wave 3 is the extended wave in the series (and it clearly is).  So the 5th wave down is not expected to break below $110 IMO.  If this scenario plays out as my model suggests then this will form a double bottom or more likely an inclining double bottom.  A subsequent break out of the channel and then possibly a back test of it from above will likely signify that the GLD pullback is done.  The current modeling suggests the bottom will be sometime in Aug or Sept 2013.

Some fundamentals that are happening also support a bottoming move in metals.  First, on hand metals stocks are very low (historic lows) as owners of the metals have been drawing it down from the metals exchanges even as the price has been falling.  So the price smash down has not been working as expected.  The fractional reserve gold system is in trouble.  The other fundamental change is that Bernanke is escaping the Fed and Janet Yellen will likely be picked to replace him.  Yellen is a Keynesian "dove" meaning she wants more inflation.  Obama is on record that he is looking for someone to continue greasing the economic wheels. 

In short, Yellen is very close to being a puppet Fed Chairman for the government.  This means that she will be most likely be announcing new stimulus measures, increasing the fed's balance sheet and generally debasing the dollar at a significantly increased rate as compared to Bernanke.  I expect a lot of turmoil to be coming from the other Fed Presidents as they watch her destroy the dollar.  I think Yellen will be compared to Japan's Abe BOJ pick who is clearly nothing more than a puppet leader for the bank of Japan.  These things will mark the end of the pullback in metals and might also mark the beginning of significant inflation here in the US.  Time will tell but metals holders will not be disappointed IMO.