Gold Forecast: Gold Still In Topping Process

Sunday, August 25, 2019

pallets of gold

Gold held in a downside consolidation into early-to-mid week, last week, with the metal dropping down to a low of 1502.10 - registered in Thursday's session. From there, a slingshot higher was seen into Friday, with the metal running all the way up to a peak of 1540.30 - also managing to end the week at or within earshot of the same.

Gold Prices, Short-Term Picture

For the very short-term, in our market report Thursday evening we noted that gold was at or into extended range for a bottom, with that low expected to come from the smallest cycle that we track - the 10-day component, which is shown on the chart below:

In terms of time, the 10-day component was some 15 trading days along from its prior labeled trough, which put it into extended range for a low to form. In terms of price, we noted the key level as being the 1519.40 figure (December, 2019 contract) for gold. Basically, reversing above that number would be our indication that this wave had bottomed - and that its next upward phase would be back in force.

With the above said and noted, Friday's early-day strength took out our 10-day upside ‘reversal point’ of 1519.40 - thus leading to the sharp rally that was seen into late-day. With the most recent decline able to remain above our downside reversal level for the mid-term cycles, there was still the potential for a spike back to or above the 1546.10 swing top, before actually forming our next 3-6 week high.

Gold Prices Mid-Term View

Stepping back, the next decent correction phase is still expected to come from the 72-day cycle, which is at or into topping range. Here again is that cycle:

In terms of time, this wave is next projected to trough around the mid-September timeframe or later, a move which is currently anticipated to end up as countertrend - against the early-May trough, which is our last low for this component, as well as being the bottom for the larger 154-day wave.

From my 8/18/19 article: "has gold already seen its high for this cycle? Right now this is speculation - though the most recent high came at or into the range where we were expecting it to. Right now, the only way that we could actually confirm this peak to be set in place would be for a reversal below the 1466.00 figure (December, 2019 contract), though we expect that number to rise markedly in the coming days."

As pointed out above, there was some speculation as to whether gold had topped the larger upward phase, though a reversal below the 1466.00 figure (December, 2019 contract) was required to actually confirm the same. These ‘reversal point’ levels are very critical to my work - and may be even more important than the individual cycles themselves. Having said that, the reversal levels are actually based upon the momentum that tracks each wave, though - for timing and trading purposes - the price reversals are more key than the cycles.

In terms of time, cycles can and do top early - and late. For example, our last mid-term peak was projected for the early-to-mid February timeframe, with the actual high registered on 2/20/19. The last mid-term trough was projected for mid-to-late May, and ended up forming in early-May - though there were several re-tests of the same into that mid-to-late May timeframe.

Going further with the above, the last mid-term trough in May was due to materialize with the 154-day time cycle, which is shown on the chart below:

In terms of price, the upside ‘reversal point’ for the 154-day cycle was noted back in May-June as being the 1311.00 figure (slightly higher for the December contract). Basically, when this figure was taken out higher, it was our best indication/confirmation that the 154-day cycle had seen its bottom - and that the next upward phase of this wave was back in force.

With the above said and noted, it would now take a reversal back below the 1480.00 figure (December, 2019 contract) to confirm the 72-day cycle to have topped, which, as noted earlier, is the wave that should be responsible for the next 3-6 week correction phase. Going further, this reversal level will change with the market action, with the latest figure always reported in our thrice-weekly Gold Wave Trader market report.

In terms of price, our ideal path is looking for a correction back to or below the 72-day moving average into early-Autumn, though we have a more precise date mentioned in our market report. In terms of patterns, as noted above, the probabilities tend to favor a countertrend decline into the next 72-day trough, to be followed by higher highs on the next swing up into later this year and/or into early-2020.

Gold Commercial Hedgers

In looking at the CFTC data from last week, the commercial hedgers (chart, above) continue to scale in short positions, adding in another 13,000 contracts last week - which puts their current net short total up to some -336,250 contracts, with the data current to the 8/20/19 close.

From the comments made in recent weeks, the commercial hedgers have moved to their largest net short position since the July, 2016 price peak. Having said that, I have also mentioned that the hedgers are 'scale' traders - and can continue to add on additional strength, if seen. They did something similar last year at the last major bottom with the 310-day cycle, where they were covering shorts aggressively well before the actual price low.

Regardless of the above, the large net shorts from the commercial hedgers is seen as a bearish indication for the gold market, and with that supports the idea of a decent decline phase playing out in the coming month or so. We know that this decline should come from our 72-day time cycle, though whether this wave has yet topped remains to be seen.

The Bottom Line for Gold

The bottom line for gold prices is that a decent correction is brewing, and should come from the 72-day cycle into the month of September - a move which is currently expected to end up as countertrend, against the early-May low. If correct, another larger rally should play out with the combination of the 72, 154 and 310-day cycles into later this year, before the next larger-degree peak attempts to form. Stay tuned.

Jim Curry

The Gold Wave Trader


http://goldwavetrader.com/

http://cyclewave.homestead.com/

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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. 

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