Gold Forecast: Gold's Final Rally Phase Into Mid-Term Peak

Sunday, October 13, 2019

gold bar and nugget

The action into last week witnessed the gold market forming its high in Thursday's session, here doing so with the tag of the 1522.30 figure (December, 2019 contract). From there, a quick spike lower was seen into Friday, where the metal formed its low at the 1478.00 figure - before bouncing off the same into the daily/weekly close.

The Overall View

As mentioned many times in prior articles, the last peak of significance was expected to come from the 72-day time cycle, which is shown again on the chart below:

That 72-day wave peaked back in late-September, and turned south into our expected window of early-Autumn, so far hitting a low of 1465.00. Right now, it is too early to actually confirm this wave to have bottomed, though there is certainly the potential for the same - due to the momentum indications that track this wave, as well as the smaller 34-day cycle, which is shown on our next chart:

In terms of price, the decline into early-Autumn was expected to see a minimum tag of the 72-day moving average, which has obviously been met with the last swing down. In terms of patterns, the move was projected to end up as a countertrend, or Elliott ABC pattern, potentially having completed at the 1465.00 low made earlier this month.

Having said the above, there as yet is no actual confirmation of a bottom with the 72-day cycle, with price needed to see a push back above our key ‘reversal point’ figure, with the exact details mentioned in our Gold Wave Trader report. This number will continue to drop going forward, depending on the action seen in-between.

Otherwise, if gold has NOT seen its bottom for the current downward phase, then key support is again noted at the 1425-1458 level (December, 2019 contract), which is the 38-50% retracement of the swing up from the May trough to the early-September peak.

Next Rally Phase Takes Gold into Mid-Term Top

If the downward phase of the 72-day cycle does end up as countertrend, then we have found that, approximately 80% of the time, the next upward phase will turn back to make higher highs for the larger swing. In other words, the probabilities favor an eventual push back above the early-September peak of 1566 in the weeks/months ahead, though we expect that move up to a very choppy, labored affair.

Stepping back, the coming rally phase of the 72-day cycle should be the one that sets up the next mid-term peak for gold, which is expected to come from our larger 310-day wave, shown again on the chart below:

The 310-day wave is the largest dominant cycle that we track, and - from the chart above - we can see this wave is slowly rolling over. If the patterns are correct, the next upward phase of the 72-day cycle should be the one that tops this larger wave, for what is anticipated to be a much larger correction into the Spring of 2020. We have identified a key date range for this expected top to materialize.

In terms of price, the downside 'risk' to the next decline phase of the 310-day cycle is back to the 310-day moving average, though there is always the potential for additional weakness through the same. Having said that, with key monthly closing support around the 1360 figure, we would expect the metal to try and remain above that figure on a monthly closing basis.

In terms of patterns, however, the next downward phase of the 310-day cycle is not expected to end gold's bullish run. That is, following the next mid-term bottom, we should see a final rally into the next long-term peak. In other words, the next correction phase of this 310-day wave should be a buy, in the anticipation of higher highs to follow.

Gold's Biggest Problem

I have mentioned this in past articles. gold's biggest problem going forward is the position of the commercial hedgers, with the updated chart shown below:

With the action seen last week, the commercial hedgers added back approximately 7,000 new shorts, with puts their current net short total at some 310,942 contracts - with the data current to the 10/8/19 close.

Going further with the above, the recent net short total was able to move above the July, 2016 levels, which I see as the biggest problem for the gold market going forward. In other words, the hedgers are positioning for a much larger decline phase, which we know should come from the 310-day time cycle. We'll continue to monitor this as we move along.

U.S. Stocks (Update)

From the comments made in recent articles, the last correction of significance was expected to come from the 45-day cycle in stocks, which peaked on September 19th - a spot where we were lucky to exit our long ETF position. Here again is that 45-day cycle:

With the action seen last week, this cycle looks to have bottomed back in early-October - which was right into our anticipated range for a bottom. In terms of patterns, that decline was expected to end up as a countertrend affair - against the 2822.12 swing low from back in August, which has been the case, with the SPX dropping down to a recent low of 2855.94.

With the above said and noted, the ideal path is for a push back to new bull market highs going forward. Short-term, there is a key date set for later this month, which could peak the current swing up - for another correction phase into the month of November.

For the bigger picture, we see stocks as being in a later-stage bull market, but one which favored to last well into next year - where the next major top is expected to form. Picking this top will be key, as what follows should be our average statistical decline of 34% or better for the SPX, even though that decline should end up as a much larger countertrend affair - holding above the February, 2016 low of 1810.10 on the SPX.

Jim Curry

The Gold Wave Trader


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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.