Gold Cycles Down Into Late-Spring, Up Into Summer

Sunday, March 31, 2019

gold bears and bulls

Last week's trading saw gold forming its high early in the week, here doing so with the tag of the 1330.90 figure, seen on a Monday time top. From there, a sharp decline was seen into late- week, with the metal dropping all the way down to a Friday low of 1291.30 - before bouncing off the same to end the week.

Gold, Short-Term

As mentioned in my prior article (3-17-19), the short-term cycles for gold were pointing higher at the time, with that rally expected to reach our minimum 20-day moving average magnet - which it did. Here is our short-term chart, showing the 10-day cycle:

gold daily continuous contract chart

In terms of patterns with the above, the assumption was that the short-term rally would end up as countertrend - due to the configuration of the larger 154-day cycle. Resistance was noted as being the 1314-1334 region, which stopped the upward phase of these waves.

For the very near-term, the key number heading into the new week is the 1287 swing low (June, 2019 contract). Basically, taking that out to the downside would favor a sharp selloff in the days to follow. In terms of time, the next short-term reversal date range for gold is set for April 3-5, and is plus or minus a day. Basically, whatever happens into that date is likely to be reversed, at least short-term.

Gold's Mid-Term Cyclic Picture

As pointed out in some of my articles over the past month or two, the next peak of significance for the gold market was expected to come from the 154-day time cycle, which is shown again on the chart below:

In terms of price, resistance to the upward phase of this wave was mentioned near the 1355 figure for the April contract. In terms of time, in our Gold Wave Trader report we noted the February 15-22 region as being the key time reversal range for the mid-term. The actual high came in at 1349.80, registered on February 20th - right into this key timeframe.

Going further with the above, the subsequent reversal off the 1349.80 swing top confirmed the downward phase of the 154-day cycle to be back in force, with the same ideally headed south into the April - May timeframe. In terms of price, our overall expectation was that a drop back to the 154-day moving average or lower would materialize, with that moving average currently at the 1269 figure (June, 2019 contract) and rising.

Weekly Dominant Cycle

For the bigger picture, as noted above the next mid-term low should come from the bottoming of the 154-day time cycle - ideally made into the April - May timeframe, though we have narrowed down the more ideal (and more precise) reversal region for this to occur. The next trough for the 154-day component is also expected to end up as the bottom for our dominant weekly cycle, which is shown on the chart below:

Adding to the notes above, the dominant weekly cycle has done a very good job at calling the mid-term turns for the gold market, though it can be early, or late. Even said, this chart is also suggesting the April - May timeframe for the next important bottom to try and form.

Stepping back further, the patterns do favor the current downward phase of the 154-day cycle (and dominant weekly cycle) to end up as a countertrend decline - holding above the August, 2018 price trough (1186), which is the prior bottom for this component. If correct, then the probabilities are 80%-or-better that the next 154-day cycle upward phase will take gold back above the late-February highs, most likely into mid-Summer of this year.

Gold Commercial Hedgers

In looking at sentiment indications for gold, the commercial hedgers have increased bearish bets since my last article, with the hedgers now holding over 151,000 contracts to the short side (chart, above).

From my 3/17/19 article: "the net short position from the hedgers is seen as a bearish technical indication for the gold market. Having said that, the commercials are not holding larger shorts seen near the September, 2017 and January, 2018 price peaks. These tops each saw the hedgers holding well over 200,000 contracts to the bearish side, which was a more obvious bearish indication at those times. Now, they are at least marginally bearish, thought this does support the idea of lower prices into later this Spring."

Current analysis: As noted above, the position of the commercials is seen as a bearish technical indication for the gold market - and particularly with the increased short bets seen in recent weeks. Once again, this supports the idea of a mid-term decline phase currently in force, and with that also supports lower prices in the coming weeks, before attempting the next important price trough.

The Overall Bottom Line

The bottom line with the above is that gold is currently assumed to be in a mid-term downward phase, coming as a result of the 154-day time cycle. In terms of price, the ideal path is for additional weakness into the April - May timeframe to bottom this wave, a move which is favored to end up as countertrend - against the August, 2018 bottom. If correct, the following upward phase of this wave should see a sharp rally into the Summer months, before giving way to another low in the months to follow. Stay tuned.


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Jim Curry is the editor and publisher of The Gold Wave Trader and Market Turns advisories - each of which specializes in the use of cyclic and statistical analysis to time the Gold and U.S. stock markets. He is also the author of several trading-related e-books, and can be reached at the URL above.