Gold's Price Trend Still Down, Looking For A Trough

Sunday, June 17, 2018

gold bars and nuggets

As pointed out in my last article, gold was holding in a consolidation pattern - with several key price reversal levels holding the last try at strength. With that, the metal broke to the downside into late last week, with the mid-term cycles continuing to point south at the present time.

gold daily chart

Gold Timing Index Update

As pointed out last week, the one glaring problem for the mid-term picture was the lack of a buy signal from our Gold Timing index (chart, above) - which is normally something that we would expect to see, before a mid-term price bottom. And, since the same had yet to materialize, there was the decent potential that a break back to new lows for the larger swing would be seen, before the next low of significance was set in place.

Going further with the above, there are actually two requirements for a mid-term buy signal to be seen with our Gold Timing Index. The first is for a divergence to form between the indicator and price, where price makes a new low - and the indicator itself does not. With the break back to new lows for the swing playing out into late last week, this divergence has now set itself up once again.

Following the initial divergence between our Gold Timing Index and price, the actual trigger for the mid-term buy signal is for the indicator to see a daily close above its upper standard-deviation band - which it has obviously yet to do. This is something that we will be watching with great interest in the days ahead, in our thrice-weekly Gold Wave Trader market report. 

Gold's 72-Day and 20-Week Cycles

In looking at the mid-term time cycles again this weekend, the next low of significance has been expected to come from the combination of the 72-day and 20-week waves, each of which are well into normal bottoming territory. The chart above shows the smaller 72-day wave, which is now 75 days along. The larger 20-week component is some 129 days along, with this cycle now moving into extended range for a trough.

With the above said and noted, the next mid-term price bottom is still expected to come from the 72-day and 20-week waves, though from where that low will come from is speculation at the present time. However, once this trough is set in place, then a statistical analysis of these waves suggests a rally of 8-16% or more will be seen on the next upward phasing of the same (mid-to-late Summer), before peaking the metal for another decline into the October or November timeframe.

From the comments made in my prior article, in order to actually confirm the next upward phasing of the 72-day and 20-week cycles to be back in force, gold needed to see a reversal back above the 1332.00 figure (August, 2018 contract). Thus, since that never materialized on the most recent try at strength, the price trend has remained to the downside. That ‘reversal point’ for now remains at the 1332.00 figure, though we expect it to drop sharply in the coming days, with the most current numbers posted in our Gold Wave Trader report.

Gold's 34-day Day Cycle

For the shorter-term picture, the most dominant cycle in the gold market is the 34-day wave, which is shown on our next chart:

In terms of price, gold needed a reversal back above the 1313.00 figure (August, 2018 contract) in order to confirm the upward phase of this 34-day wave to be back in force. With the action seen early last week, the metal ran right up to this key number - but was never able to push on above it. With that, the next downward phase of this wave now looks to be back in force, with the odds favoring a continued push to lower price levels in the days ahead, before this cycle tries to form another bottom. There is no new upside reversal level for this 34-day wave, though one should start to develop going forward, depending on the action seen in-between.

Commercial Hedger Update

From the comments made in recent articles, the best support for a mid-term upward phase for gold is the current position of the commercial hedgers, which are holding one of their smallest net short positions seen in recent years. Here again is the chart, showing the current hedger position:

In looking again at the COT numbers from last week, the commercial hedgers actually added about 6,000 new shorts, which brings their current net short total up to -140,587 contracts, with the data updated to the 6/11/18 close. Even with this action, the position of the hedgers is seen as supportive of a mid-term upward phase, though - as long as the metal stays below key reversal levels - this rally can come from lower numbers than already seen.

The Overall Bottom Line

In summing up the above, the next mid-term price trough is still expected to come from the 72-day and 20-week time cycles, though the downward phasing of the same remains intact at the present time, and would currently require a reversal back above the 1332.00 figure to confirm an upturn; this number is expected to drop markedly in the days ahead, depending on the action. Once these waves do bottom-out, a rally of 8-16% or more is projected to play out on the following upward phase of the same, a move which peaks again into late-Summer - for another correction into the Autumn months, before rallying into early-2019. 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.