Forecast: Gold Cycles Predicted The Decline…More To Come

Sunday, March 3, 2019

fine gold

Last week's trading saw Gold forming its high in Monday's session, here doing so with the tag of the 1334.90 figure. 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 slightly off the same into the daily/weekly close.

Gold Cycle Update

From the comments made in my last article (i.e., "Gold Cycles Looking for a Peak"), a mid-term top was due to materialize in the current timeframe, with our Gold Wave Trader report identifying the key timeframe of February 15-22 for that high to develop - and with the 1355 figure (April, 2019 contract) noted as key resistance. The actual high was registered on February 20th at the 1349.80 figure, and the subsequent reversal lower now favors the next mid-term downward phase to be back in force.

In looking at the cycles, the last upward phase of the 34-day wave was expected to peak the larger 154-day component, once again with key resistance noted at the 1355 figure. From this high, a sharp correction was expected to play out into mid-to-late Spring, one which we should now be in the midst of - and with more to come. Even said, the decline won't be apocalyptic, but should be a normal mid-term downward phase - within the context of a larger bullish period.

In terms of price, regarding my rule with cycles and moving averages, the probabilities are good that a decline back to the 154-day moving average is in progress:

gold daily continuous contract chart

In terms of time, our focus is currently on the mid-to-late Spring timeframe for the next mid-term trough to form with gold, with that mid-term low expected to come from the same 154-day cycle. In terms of patterns, the current decline phase with this wave is favored to end up as a countertrend affair - against the August, 2018 low of 1179. In other words, the odds will favor that low to hold the current mid-term downward phase.

Even with the mid-term cycles now deemed to be pointing south, there should be the normal rallies seen in-between, with the first of these coming due. However, these rallies should, ultimately, end up as counter to the (mid-term) bearish downtrend, and with that each of these should be followed by lower lows, upon completion.

Commercial Hedgers

Supporting the idea of a mid-term correction phase currently in progress is the position of the commercial hedgers, which is shown on the chart below:

Based upon the data current to the 2/19/19 close, the gold commercial hedgers are holding a net short position of 166,477 contracts - which is their largest seen in nearly a year. And, while the COT numbers won't be up-to-date until around mid-March (due to the CFTC's reporting schedule, following the recent government shutdown), their current positioning is seen as a bearish indication for the market.

The Bottom Line

The overall bottom line is that the mid-term cycles for gold have switched from up to down, and with that we should be looking for additional weakness in the weeks and months ahead. In-between, however, their should be the normal countertrend rallies seen along the way, with the first of these ideal looking set to materialize at any time. 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.