Gold Cycle Key Turn Dates

Sunday, July 15, 2018

gold bar

Last week's trading saw gold forming its high for the week in Monday's session, here doing so with the tag of the 1266.90 figure. From there, a chop to the downside was seen into late-week, with the metal dropping all the way down to a Friday low of 1236.20 - before bouncing slightly off the same to end the week.

Gold's Short-Term Cycles

From the comments made in my prior article, the most recent short-term rally phase (with the 10 and 20-day cycles) was expected to end up as a countertrend affair, due to the configuration of the larger-degree cycles for the gold market. With the push back to lower lows into Friday's session, the inference is that the next downward phase of the smaller 10 and 20-day waves is back in force, with the next key date of focus being July 24th, plus or minus, where the larger 20-day component is next projected to trough.

In-between, the next shorter-term bounce should come from the smaller 10-day wave (chart, above) - which is already some 8 trading days along to the downside. That bounce will normally see a rally back to the 10-day moving average or higher - a move which would be anticipated to end up as countertrend, for additional weakness into later this month.

The Mid-Term Cycles

With the continued break to lower lows, the mid-term cycles - which include the 72-day, 20-week, and 154-day waves - are all still pointing south at the present time, and thus still looking for a bottom. From the comments made in recent articles, the metal (August, 2018 contract) needed to see a reversal back above the 1313.00 figure to confirm a mid-term trough in place - a move which never materialized, thus keeping the combination of these waves pointing south.

Going further with the above, the 72-day cycle is now 97 days along, and thus is into extended territory for a bottom. The larger 154-day wave (chart, above) - which is now coming into dominance - is 151 days along, and thus is also looking for a low in the days/weeks ahead. Even said, the metal would still need to see a reversal back above the 1313.00 figure to confirm a bottom for these waves to be in place, though we expect this number to drop sharply going forward - depending on the price and technical action seen in-between.

Gold Timing Index

Our best indication of the trend of the gold market for the mid-term is our Gold Timing Index, which is updated and shown again on the chart above. From the comments made in past articles, a divergence between price and this particular indicator is the initial setup for a mid-term buy signal. Having said that, to actually trigger the same, the Gold Timing Index needs to see a daily close above its upper standard-deviation band.

With the break to lower lows for the swing into Friday's session, we are now seeing the initial setup for a buy signal with our Gold Timing Index. Whether that buy will actually materialize in the days ahead remains to be seen, as a close above the standard-deviation band is still required. This is something that we will be tracking with a great deal of interest in our real-time edition of the Gold Wave Trader report.

Going further with the above, what happens with our Gold Timing Index is key going forward, due to the fact that buy and sell signals with the same tend to occur near price tops and bottoms with the 310-day time cycle (chart, above). Going even further, with the average upward phases of this 310-day component having witnessed rallies of 19-20% or more off the bottom, there is the potential for that type of move, should any new mid-term buy signal appear.

Gold Seasonals

The chart above once again shows the average seasonal pattern for the gold market. Inside this pattern, gold shows a bottom for the mid-August timeframe, plus or minus, where the pattern turns stronger into late-year - and which normally extends into the first few months of the following year.

Key Dates to Watch for Gold

With the above said and noted, there are two dates that are of key interest going forward. The first comes up around the July 24th timeframe, plus or minus, which is where the next 20-day trough is projected to materialize. The second period of interest is the wider range of mid-August, which is the seasonal bottoming window for gold. One of these key times may be the next spot for a mid-term trough to try and materialize, and should be watched closely in regards to technical action.

Gold, Long-Term

For the longer-term picture, the best measuring stick for the gold market is the Gold/CPI ratio, which is shown on the chart above. That is, in larger bear markets (which we have been in, since the 2011 peak), the metal will almost always see a drop back to 'fair value' - before the actual price bottom is set in place. Using the Gold/CPI ratio, we can calculate that gold would need to see a drop back to the 800's for a drop back to fair value to materialize - which gives us some idea of the approximate downside risk for the bigger picture.

Even with the above, there should be many mid-term up-and-down phases seen in-between now and the time when gold sees a return to fair value. The next of these should be a mid-term upward phase assuming control in the coming weeks, though from what price level remains speculation at the present time - and with that upward phase yet to be confirmed in force.

Gold Commercial Hedgers

In looking at the COT numbers from last week, the commercial hedgers (chart, above) added approximately 7,000 new shorts, which puts them currently holding some 100,394 shorts, with the data current to the 7//10/18 close. From the comments made in prior articles, I see this as supportive of the next mid-term rally phase - though that rally has yet to be confirmed in force, but is something we will be watching for going forward.

The Bottom Line

The overall bottom line is that the short-term cycles topped again early last week, and with that are headed lower into later this month. As for the mid-term cycles, the combination of the same are well into extended range for a bottom to materialize - though it would currently take a reversal back above the 1313.00 figure (August, 2018 contract) to confirm this low in place, a number which looks to drop sharply in the coming days, depending on the action seen in-between.

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.