Gold Forecast: Key Message For Gold Price And Stocks

Sunday, October 27, 2019

fine gold

Last week's trading saw gold forming the bullish path of an early-week low into support, here hitting a bottom of 1484.00, made in Tuesday's trading session. From there, strength was seen into later in the week, with the metal pushing up to a Friday high of 1520.90 - before backing off the same to end the week.

Gold's Short-Term Picture

As pointed out last week, gold's last short-term bottom was expected to come from the 10-day cycle, which was at or into bottoming territory - and thus was due for a turn higher into last week. In terms of price, the reversal above the 1505.00 figure (December, 2019 contract) - though later adjusted to the 1502.40 figure in our gold Wave Trader report - was taken out, thus triggering the expected rally phase of this cycle:

With the above said and noted, until proven otherwise this 10-day wave is still seen as heading higher moving into the new week, with the next minor cycle peak expected to come from the same. The good news is that the current upward phase of this wave was able to take out its prior peak of 1503.00 - thus forming a 'higher-high'. This is normally a bullish price pattern, and favors the next correction phase of this wave to end up as countertrend (i.e., 'higher-low').

Gold, Medium-Term

Even with the above said and noted, gold has yet to confirm an upturn in our larger 72-day cycle, which is shown again on the chart below:

From the comments made over the past month or so, this 72-day cycle was projected to bottom at or into the late-September to early-October timeframe, with our key date range (noted in our market report) being the September 27 - October 4th region. The 1465.00 swing bottom came right into this range, being registered on October 1st - about as well as could be expected.

Even said, the recent action has yet to actually confirm a turn higher with our 72-day wave, though this could be triggered as early as the coming trading week. If that is seen, we are looking for additional strength in the coming months, with the ideal path favoring a move into the low-end 1600's going forward - though we expect the next upward phase of this 72-day wave to be a labored, choppy affair.

Stepping back further, the upward phase of the 72-day cycle is expected to take gold into its next mid-term peak, which should come from the larger 310-day wave, shown again below:

Going further with the above, once the next mid-term peak forms with the 310-day cycle, we are expecting largest percentage correction since the decline into the August, 2018 price low. In terms of price, that decline should see the 310-day moving average acting as a minimum magnet, though the patterns do favor that move to end up as a countertrend affair - to be followed by higher highs on the next upward phase of this larger wave.

Commercial Hedgers

In looking at the latest numbers from the CFTC, the commercial hedgers added back to the short side some 7,000 contracts with the action over the past week or so, which puts their current net short total back up to -295,357 contracts - with the data current to the 10/22/19 close.

As noted many times over the last month or two, the current net short position held by the commercials is the most bearish technical indication for gold going forward, and is likely to limit the amount of upside seen with our 72-day cycle going forward. Going further, the hedgers are positioning for a larger-degree decline, with that decline expected to come from our 310-day time cycle, thus making the tracking of this cycle very important in the weeks/months ahead.

U.S. Stock Market

As noted over the past month, the last decent low came with the 45-day cycle in U.S. stocks, with that bottom projected to play out into the early-October timeframe - and made on October 3rd with the tag of the 2855.94 SPX CASH figure:

In terms of patterns, the last downward phase of the 45-day cycle was anticipated to end up as a countertrend affair, holding above the August bottom of 2822.12 on the SPX - which it did do. With that, the analysis called for a minimum push back above the 3021.99 swing top (from back in mid-September), which we have now seen met with the action into Friday.

With the above said and noted, we were able to take a long position in the SPY into the last round of weakness into late-September/early-October, having recently exited into Friday's rally for a nice overall again. With that, we are again on the lookout for yet another top, which should come from our larger 90-day wave, shown on the chart below:

As to what price the next 90-day top will form is speculation for now, though - once in place - the SPX should see another decent correction into the month of November, one which sees the 35-day moving average acting as the minimum magnet.

Going further with the above, due to the configuration of our larger-degree cycles, the next downward phase of the 90-day wave is expected to end up as another countertrend affair, holding well above the early-October trough of 2855.94 on the SPX. If correct, higher highs should easily be seen into December or later, before the next long-term peak is expected to materialize for stocks.

For the long-term picture for stocks, we are looking for a major price top to occur next year. That peak is expected to come from the larger-degree cycles that we track, most notably the 360-day wave. Once it is complete, the probabilities are above-average that a correction of 30% or more will be seen for the U.S. stock market, a decline which should be also accompanied by a recession/contraction in the business cycle. The timing of this will be paramount going forward; stay tuned.

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.