After a huge sell off in Gold, last Friday was marked as a reversal day. The precious metal has made a strong reversal from $1,179 to $1,230 within a day, signalling that at least a short-term bottom was placed. As you can see in the first chart below, Gold has moved upwards in an impulsive form making 5 waves up. According to the Elliott wave theory, we should now expect a pull back downwards that will most probably test $1,225-1,210 price level.

Gold is starting its downward corrective move, and we prefer short positions with $1,269 as a stop. The downward correction is expected to test the 50% and 61.8% Fibonacci retracements. At those price levels our short position should be covered and we should start thinking about a long position. This long position is preferred because we believe that Gold has another upward move coming. The longer term chart, as shown below, shows that although Gold is still trading within the downward sloping channel, it has room for an upward bounce.

Gold has touched the lower boundaries of the downward sloping channel and we believe it can bounce towards the upper boundaries. This gives us a target near $1,330. The upward correction we believe is still not over and long positions near $1,210 with $1,179 stop will be preferred with $1,300 as a target. Concluding, in the short term, we are waiting for prices to fall towards $1,210-15 and we will turn bullish with $1,280-1,300 target and $1,179 stop.